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Earls v. Harvest Credit Management VI-B, LLC

Supreme Court of Arkansas

April 23, 2015

LINDA J. EARLS AND TONY L. EARLS, APPELLANTS
v.
HARVEST CREDIT MANAGEMENT VI-B, LLC, APPELLEE

APPEAL FROM THE GREENE COUNTY CIRCUIT COURT. NO. CV-2006-247. HONORABLE PAMELA HONEYCUTT, JUDGE.

Crawley, DeLoache & Hargis, PLLC, by: Joel G. Hargis; and The Cruz Law Firm, PLC, by: Kathy A. Cruz, for appellants.

Hosto & Buchan, P.L.L.C., by: Travis A. Gray and Brien Saputo, for appellee.

Mitchell, Williams, Selig, Gates & Woodyard, P.L.L.C., by: R.T. Beard III and Brian A. Pipkin, amicus curiae for Citibank, N.A.

Munson, Rowlett, Moore & Boone, P.A., by: Sarah E. Cullen; and Dinsmore & Shohl, LLP, by: Alan H. Abes, amicus curiae for Unifund CCR Partners.

JIM HANNAH, Chief Justice. Special Justice JAMES ARNOLD joins this opinion. HART, J., concurs. BAKER and GOODSON, JJ., dissent. WOOD, J., not participating.

OPINION

Page 796

JIM HANNAH, Chief Justice

Appellant Linda J. Earls (" Linda" )[1] appeals an order of the Greene County Circuit Court denying Linda's motion to set aside default judgment in favor of appellee Harvest Credit Management VI-B, LLC (" Harvest" ). For reversal, Linda argues that the circuit court erred in granting default judgment because Harvest's summons was defective. Pursuant to Arkansas Supreme Court Rule 1-2(b)(1) (2014), we have jurisdiction of this case, as this appeal involves an issue of first impression. We reverse.

Linda and Tony L. Earls (" the Earlses" ) received a Chase credit card, and Harvest is the assignee of the credit-card account. The Earlses made numerous charges on the card, leaving an outstanding balance of $4678.21. When the Earlses' account remained past due, Harvest placed demands for payment, but the account went unpaid. On August 30, 2006, Harvest filed a complaint seeking a judgment against the Earlses in the amount of $4678.21, prejudgment interest of $2448.56, and attorney's fees. On November 14, 2006, the Earlses were served with process. Harvest's summons, which accompanied the complaint, stated that the answer must be filed " within (20) TWENTY DAYS from the day you were served this summons; OR THIRTY (30) days if you are a non-resident of this state or a person incarcerated in any jail, penitentiary, or other correctional facility in this state " (emphasis added). According to Arkansas Rule of Civil Procedure 12(a) in effect at the time filed, the summons correctly stated that an in-state defendant had twenty days to answer and that an out-of-state defendant had thirty days to answer, but the summons incorrectly stated that an incarcerated defendant had thirty days, instead of sixty days, to file an answer. The Earlses were not incarcerated. The Earlses did not answer Harvest's complaint. On March 13, 2007, the circuit court entered a default judgment in favor of Harvest in the amount of $4678.21, prejudgment interest of $2980.73, attorney's fees of $500, and court fees of $240.

On December 14, 2012, Linda filed a motion to set aside the default judgment, arguing that Harvest's summons was defective on its face and did not strictly comply with Rule 4 of the Arkansas Rules of Civil Procedure because of the incorrect response time related to incarcerated defendants. She also asserted that the default judgment was void and unenforceable. In support of her position, Linda relied on an unreported federal district court decision that held that the summons, which was identical to the one in the present case, was defective. See Charkoma Res., LLC, v. JB Energy Explorations, LLC, No. 09-02118, 2009 WL 4829014 (W.D. Ark. Dec. 8, 2009). In response, Harvest argued that the federal case was

Page 797

not binding on this court and that the Earlses' response time was listed in its summons and, therefore, it complied with Rule 4.[2] On March 8, 2013, the circuit court entered its order denying Linda's motion to set aside default judgment. Linda appealed to the court of appeals, which reversed the circuit court's decision. See Earls v. Harvest Credit Mgmt., 2014 Ark.App. 294. In Earls, the court of appeals held that the summons was defective because it stated that an incarcerated defendant had only thirty days to respond instead of the correct sixty days, even though the error did not apply to the Earlses.

On May 23, 2014, Harvest filed a petition for review. In its petition, Harvest argued that the court of appeals' holding conflicted with the plain language of Rule 4, which, Harvest claimed, does not expressly require a summons to list the correct response time for every potential defendant. Harvest maintained that Rule 4 requires only that a summons state the time within which the actual defendant is required to respond. Citibank, N.A. and Unifund CCR Partners filed amicus curiae briefs in support of Harvest's argument. This court accepted Harvest's petition for review. When we grant a petition for review, we consider the appeal as though it had been originally filed in this court. Bohannon v. Robinson, 2014 Ark. 458, 447 S.W.3d 585.

On appeal, Linda argues that the circuit court erred in entering a default judgment and in refusing to set aside the default judgment because Harvest's summons did not strictly comply with Rule 4. Specifically, Linda asserts that the summons was defective because it listed " the defendant," as set forth in the language of Rule 4(b), when there were actually two defendants; that each one could have chosen a different response time listed in the summons; and that the response time of incarcerated defendants was in error.

Harvest responds that the incorrect information on the summons was not applicable to the Earlses. In support of its position, Harvest cites Talley v. Asset Acceptance, LLC, 2011 Ark.App. 757 (reversing the circuit court's refusal to set aside the default judgment because the circuit court's zip code was incorrect), for the proposition that Rule 4 requires substantial compliance and that any incorrect information that is superfluous will not render the summons deficient. Harvest also relies on this court's ruling in Nucor Corp. v. Kilman, 358 Ark. 107, 186 S.W.3d 720 (2004), in which this court held that the summons at issue was not fatally defective because Nucor, the party at issue, was correctly identified in the summons; that the summons in no way failed to apprise Nucor of the pendency of the lawsuit; and that a literal application of adhering to a strict compliance of Rule 4(b) would lead to an absurd result.

The issue on appeal is whether an error, which does not apply to the actual defendant, or defendants in this case, renders the summons defective. Our standard of review for an order denying a motion to set aside default judgment depends on the grounds upon which the appellant claims the default judgment should be set aside. Steward v. Kuettel, 2014 Ark. 499, 450 S.W.3d 672. In cases in which the appellant claims that the default judgment is void, our review is de novo, ...


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