May v. Bob Hankins Distributing Co., 89-261

• Decision Date: 05 March 1990
• Docket Number: No. 89-261,89-261
• Citation: 301 Ark. 494,785 S.W.2d 23
• Parties: , 20 A.L.R.5th 940 Willie Frances MAY, Appellant, v. BOB HANKINS DISTRIBUTING COMPANY, Appellee.
• Court: Arkansas Supreme Court

Page 23

785 S.W.2d 23

301 Ark. 494, 20 A.L.R.5th 940

Willie Frances MAY, Appellant, v. BOB HANKINS DISTRIBUTING COMPANY, Appellee.

No. 89-261.

Supreme Court of Arkansas.

March 5, 1990.

Michael E. Todd, Paragould, for appellant.

William F. Sherman, Little Rock, for appellee.

GLAZE, Justice.

This is an appeal from the chancellor's order setting aside two default judgments entered against the appellee on February 2, 1988, and March 15, 1988. The appellant received two judgments against her former husband, Billy May, for failure to comply with their divorce decree and for attorney fees. Billy May is employed by the appellee. Two writs of garnishment after judgment were served on the appellee. When the appellee failed to respond to either of the two writs, two default judgments were entered against the company totaling $22,442.77. In setting aside the default judgments, the chancellor found that Ark.Code Ann. § 16-58-124 (1987) governed service of the writs, and that the service of the writs was not in compliance with this statute.

In her appeal, the appellant argues that the chancellor erred in finding that § 16-58-124 was not superseded by ARCP Rule 4(d)(5). ¹ The appellee argues that the chancellor was correct in finding that service of the writs was invalid, and in addition, makes three other arguments on why the chancellor's setting aside the default judgments must be affirmed. We agree with the appellant's argument that ARCP Rule 4(d)(5) controls service and find no merit in two of the appellee's alternative arguments. However, we find that appellee's other argument was not fully developed below. Therefore, we reverse and remand.

The first writ of garnishment was served on the appellee's bookkeeper, Loretta Bozeman, at the corporation's office on November 16, 1987. According to her testimony, at the time the writ was served she and another woman were the only ones in the office, and she was more or less in charge. On February 11, 1988, the second writ of garnishment was served on Wanda Hankins, the secretary of the corporation and wife of Bob Hankins, the president of the corporation. The returns did not reflect if the president was unavailable when the writs were served, and testimony elicited at the hearing regarding the subject was inconclusive. Bob Hankins testified that since both writs were served on Mondays, he, in all probability, was there. However, the company does not keep any records on when Hankins is in or out of the office. According to Hankins, he first learned about the default judgments when a writ of garnishment was served on the company's bank account in July of 1988. At this time, the appellee filed a Motion to Set Aside Judgment.

We first must decide whether Ark.Code Ann. § 16-58-124 or ARCP Rule 4(d)(5) controls service of a writ of garnishment on a domestic corporation. As previously noted, the chancellor held § 16-58-124 was controlling and the service attempted in this matter failed to comply with it. The appellant argues that Rule 4(d)(5) superseded § 16-58-124, and that her service of the writs met all the requirements of the Rule. Section 16-58-124(a) and ARCP Rule 4(d)(5) provide the following:

§ 16-58-124 METHOD OF SERVICE--CORPORATIONS

(a) When the defendant is a corporation created by the laws of this state, the service of summons may be upon the president, mayor, or chairman of the board of trustees. In the case of the absence of the above officers, then it may be served upon the cashier, treasurer, secretary, clerk, or agent of the corporation.

ARCP 4 SUMMONS

(d) PERSONAL SERVICE INSIDE THE STATE: A copy of the summons and the complaint shall be served together. The plaintiff shall furnish the person making service with such copies are necessary. Service shall be made as follows:

(5) Upon a domestic or foreign corporation ... by delivering a copy of the summons and complaint to an officer, partner other than a limited partner, managing or general agent, or any agent authorized by appointment or by law to receive service of summons.

In our per curiam of December 18, 1978, we adopted the Arkansas Rules of Civil Procedure based on Act 38 of 1973 and our constitutional and inherent authority to regulate procedure in the courts. Before that time, the Civil Code controlled all aspects of practice and procedure in this state. Section 16-58-124 is part of that Civil Code and is found in Title 16 of the Code, Practice, Procedure, and Courts, and in subtitle 5, Civil Procedure Generally. Act 38 provides that all laws in effect at that time regarding pleading, practice and procedure in civil proceedings would remain in effect only until this court prescribed rules regarding the same. Since the adoption of the Rules of Civil Procedure, this court has listed statutes in per curiams that were deemed superseded. Section 16-58-124 was not included in the list. However, in the per curiams, this court has stated that the question of supersession of all other rules and statutes will be determined by Act 38 and the supersession rule--"All rules in conflict with the Arkansas Rules of Civil Procedure ... shall be deemed superseded...." See ARCP Rule 1, Reporter's notes; see also Venable v. Becker, 287 Ark. 236, 697 S.W.2d 903 (1985). Under ARCP Rule 81(a), it is stated that these rules shall apply to all civil proceedings cognizable in the circuit, chancery, and probate courts of this state, except in those instances where a statute which creates a right, remedy, or proceeding specifically provides a different procedure in which event the procedure so specified shall apply.

The facts in the present case clearly illustrate that § 16-58-124 and Rule 4(d)(5) cannot stand together. Because the absence of the corporation's president was never shown, service on the bookkeeper and the secretary of the corporation would not be proper under § 16-58-124. But, under these same circumstances, service on the secretary of the corporation and the bookkeeper, who testified that she was "more or less in charge of the office" at the time of the service, would be proper under Rule 4(d)(5). Since these provisions conflict and § 16-58-124 does not fit into the exception described in ARCP Rule 81(a), we must hold that Rule 4(d)(5) supersedes § 16-58-124. In so stating, we note the case of Travelodge International v. Handleman National Book Co., 288 Ark. 368, 705 S.W.2d440 (1986), where this court stated that garnishment is a special statutory procedure and to the extent that the garnishment procedures differ from the Rules of Civil Procedure, the statutes control. However, in that case, this court was referring to Ark.Code Ann. §§ 16-110-401 to-110-415 (Garnishment Proceedings), and these statutes do not contain a method of service provision. Rather, § 16-110-402(2)(A) (Supp.1989), states that the writs shall be served in the same manner as writs of summons, which would be pursuant to ARCP Rule 4.

Further, we note Rule 4(k), a 1986 amendment to the Rule, which states the following:

Whenever any rule or statute requires service upon any person, firm, corporation or other entity of notices, writs or papers other than a summons and complaint, including without limitation writs of garnishment, such notices, writs or papers may be served in the manner prescribed in this Rule for service of a summons.

This provision makes it clear that writs of garnishment are to be served pursuant to ARCP Rule 4.

Since we find error in the chancellor's holding, we now turn to the appellee's alternative arguments of why the default judgments should be set aside. The chancellor did not address these arguments below. However, we can address these issues, because we review chancery cases de novo, and the chancellor's decision will be affirmed if correct for any reason. See Apple v. Cooper, 263 Ark. 467, 565 S.W.2d 436 (1978). We first address the appellee's argument that the chancellor's ruling can be affirmed, because the default judgments should have been set aside pursuant to ARCP Rule 55(c) for excusable neglect, unavoidable casualty, or other just cause.

Also, under ARCP Rule 60(c)(7), the trial court, after 90 days after the filing with the clerk of the court, has the power to vacate a judgment for unavoidable casualty or misfortune preventing the party from appearing or defending. However, before a judgment can be set aside under this rule, the defendant in his motion must assert a valid defense to the action and make a prima facie showing of the defense at the hearing. ARCP Rule 60(d). We have stated that default judgments are not favorites of the law and should be avoided when possible. See Burns v. Shamrock Club, 271 Ark. 572, 609 S.W.2d 55 (1980). Further, we have noted that default judgments are a harsh and drastic action and may deprive a party of substantial rights. Id.

While the chancellor did not rule on this issue below, the following evidence was presented in the appellee's petition to set aside the judgments and by testimony at the hearing, on why the appellee failed to answer the writs. Wanda Hankins, the secretary of the corporation and the bookkeeper were the only ones that knew about the service of the writs of garnishment. When the writs were served, the appellee was already withholding money from Billy May's salary pursuant to an earlier writ of garnishment from appellant's judgment for child support. The bookkeeper believed and advised Wanda Hankins that the writs served on the corporation in November and February were related to this earlier writ of garnishment, with which the appellee was already complying. However, Wanda Hankins did testify that she wondered why she was receiving other writs when they were already withholding the money. In addition, the testimony showed that during this same time the company received and answered a writ of garnishment from the Surgical Clinic of Northeast Arkansas for medical expenses incurred by Billy May.

After reviewing the above evidence, we agree...