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Phillips v. Delage Landen Financial Services

Court of Appeals of Arkansas, Division IV

January 30, 2019



          Law Office of James W. Harris, by: James W. Harris, for appellant.

          Nixon, Light & Buzbee, PLLC, by: John B. Buzbee, for appellee.

          BART F. VIRDEN, Judge.

         Gary Phillips appeals the Mississippi County Circuit Court's denial of his motion to set aside summary judgment in favor of DeLage Landen Financial Services ("DeLage"). On appeal, Phillips argues that (1) he was entitled to relief pursuant to Rules 55 and 60 of the Arkansas Rules of Civil Procedure; (2) the circuit court lacked jurisdiction; and (3) the city of Blytheville's ("the city's") original answer denying that Delage is entitled to judgment inured to his benefit. While the appeal was pending, DeLage filed a motion to dismiss contending that Phillips untimely filed his notice of appeal. We affirm the circuit court's decision and deny the motion to dismiss.

         I. Relevant Facts

         In 2013, Phillips was the general manager of the Blytheville Waterworks Department ("waterworks"), and he entered into three lease agreements with Memphis Communications Corporation for three copy machines, among other items. On March 2, 2015, DeLage filed a complaint against the city for replevin of personal property and for the remaining payments on the three separate lease agreements for the copiers. On April 16, 2015, the city filed an answer denying responsibility for the defaulted leases, and it attached an incident report detailing Phillips's involvement regarding $9, 708 missing from the waterworks account. The city stated that the copiers subject to the lease were in the possession of the Arkansas State Police pending an investigation into an alleged fraud in connection with their purchase.

         On May 11, 2015, DeLage filed an amended complaint naming the city, waterworks, and Phillips as defendants. DeLage requested $99, 049.65 for the unpaid lease agreements. In the amended complaint, DeLage asserted that "should it be demonstrated to the Court that Blytheville did not benefit from, use or authorize the lease of the subject property, Phillips has committed an act of conversion by exercising dominion and control over Plaintiff's property adverse to Plaintiff's superior rights in the property." Phillips was served with a copy on May 18, 2015. He did not file a response to the complaint.

         On June 5, 2015, the city filed a separate answer in which it claimed that Phillips signed all three leases without authority to do so and that he had used the city's checks to make unauthorized withdrawals on its accounts.

         On February 10, 2016, the city and waterworks were served with requests for admissions. Neither the requests for admissions, nor the separate defendants' responses to them were served on Phillips. On September 1, 2016, Phillips was served with DeLage's request for admissions. DeLage requested that Phillips admit or deny that he had no authority to sign the lease agreements for the copy machines, that his name appears on the agreements, that he received the property, that he had not made the payments, that payment was past due, and that the total amount due was $99, 049.65. Phillips did not respond to the requests for admission.

         On October 14, 2016, DeLage filed a motion for summary judgment, requesting that the court dismiss the city and waterworks and hold only Phillips liable. Phillips was served with this motion and did not respond.

         On February 7, 2017, the circuit court entered an order for summary judgment. Based on Phillips's failure to answer the amended complaint for replevin and his failure to respond to the request for admissions, the circuit court deemed that Phillips had admitted the following: that his signature was on the three lease agreements at issue, that he did not have the authority to execute the lease agreements on the city's behalf, that he received the leased property, that he had not made the required lease payments, that he was in default on the lease contract, and that the total accelerated amount due on the leases is $99, 049.65. The circuit court granted summary judgment to DeLage and awarded the past-due amount plus 10 percent postjudgment interest and $1, 715 in costs and attorney's fees.

         On February 27, 2017, Phillips filed a motion to set aside default judgment pursuant to Arkansas Rule of Civil Procedure 55(c). Phillips asserted that "there are multiple issues of fraud and misrepresentation contained in this case file" and that he could present a meritorious defense in the matter. Specifically, Phillips contended that (1) DeLage was not licensed to do business in Arkansas; (2) he was authorized to enter the lease contract; (3) he never converted the copy machines because the city always had possession of them; (4) the copy machines had been returned in almost new or new condition to the leasing agent and DeLage had failed to mitigate damages; and (5) he was never served with the separate defendants' requests for admission and answers to the requests. Phillips asserted that he had proved a meritorious defense to the judgment because the city and waterworks had possession and control of the leased equipment.

         On March 13, 2017, Phillips filed an amended motion to set aside judgment in which he argued that the judgment could also been seen as one for summary judgment, and under Arkansas Rule of Civil Procedure 60(c), the circuit court should set aside the judgment. In his amended motion he reiterated the contents of his original motion, and he stated that he did not respond to the initial complaint because he "honestly believed that the City of Blytheville and the Blytheville Waterworks would file responses which would inure to his benefit" and that the separate defendants' indication that Phillips had personal liability in this matter came as a "complete shock[.]" Phillips asserted that the leases named the city as the guarantor and lessee and that as the manager of waterworks, he had authority to enter into the lease agreement. He explained that when he resigned from the position, the copiers were in "brand new condition." Phillips asserted that the judgment against him was a windfall for DeLage, and allowing the judgment to stand constituted a miscarriage of justice. Phillips contended that he could present a meritorious defense because he had been an agent of waterworks and could not be held personally liable on the lease contract.

         The circuit court held a hearing on the matter in August 2017, and Phillips chose not to testify at the hearing. The circuit court ordered posthearing briefs regarding the issue of the court's subject-matter jurisdiction over the case. In his brief, Phillips argued that the lease agreement contained a clause that divested the Arkansas courts of jurisdiction. Phillips also reiterated his arguments that he was never served with the separate defendants' requests for admissions or responses; that he had the authority to enter the leases and any contention otherwise was false; that the amount of damages was preposterous; that the ...

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