January 10, 2017
by Jillian Wilson
Wilson & Associates, P.L.L.C. – USFN Member (Arkansas, Tennessee)
Arkansas courts have recently reviewed cases regarding the sufficiency of constructive service by warning order. Service by warning order is governed by Arkansas Rule of Civil Procedure 4(f), which states: “If it appears by the affidavit of a party seeking judgment ..., after diligent inquiry, the identity or whereabouts of a defendant remains unknown ..., service shall be by warning order issued by the clerk.”
Examined in recent Arkansas case law is the issue of what constitutes “diligent inquiry,” and to what extent must the “diligent efforts” be described within the affidavit submitted to the court? The Supreme Court of Arkansas held that “A mere recitation in an affidavit that a diligent inquiry was made is not sufficient.” Smith v. Edwards, 279 Ark.79, 648 S.W.2d 482 (1983). Rule 4(f) requires the party seeking constructive service by warning order to show that he or she did, indeed, attempt to locate the defendant. So, what is a sufficient description of “diligent inquiry” to withstand a challenge to validity of service? An analysis of recent Arkansas precedent provides some insight.
Billings v. U.S. Bank National Association
In this case, the court held that the bank (which had been the plaintiff in an underlying foreclosure action) did not properly serve the “unknown heirs of Doann Billings” (defendants in that foreclosure action) by warning order because the “diligent inquiry” requirement was not satisfied. Billings v. U.S. Bank National Association, 2016 Ark. App. 134, 484 S.W.3d 715 (Ark. Ct. App. 2016).
The bank had submitted an affidavit for warning order a few weeks after filing its complaint in 2012. The affidavit stated that counsel “made diligent inquiry” into the whereabouts of the “Unknown Heir(s) of the borrower”, but that “Defendant(s)’ present address(es) are unknown.” Through counsel, the bank received a fax regarding the petition of the deceased borrower’s son to be appointed the personal representative of the borrower’s estate. The petition included the son’s address as the subject property address. The bank published the warning order for the Unknown Heir(s) but subsequently amended its complaint to include the borrower’s son and two sisters as defendants. The bank then filed an affidavit for warning order against the borrower’s son/personal representative, Montrevel Billings, claiming that pursuant to diligent inquiry, it discovered that the property address was no longer his address and that his current address was unknown. Ultimately, the circuit court granted a default judgment in which it dismissed Montrevel Billings, declared the property to be in foreclosure, and ordered the home to be sold in a commissioner’s sale. Notice of the commissioner’s sale was done by warning order.
Prior to the commissioner’s sale, Montrevel Billings filed a motion to vacate the foreclosure decree, and the court suspended the sale of the home until the matter could be resolved. A hearing was held in 2015, at which time the court found that service was proper and denied Montrevel’s motion. Montrevel filed a motion for reconsideration, which was also denied; he appealed.
On appeal, the court in Billings stated that the bank had “presented no facts in either … affidavit to support its statement that it made a diligent inquiry.” Though the bank later tried to prove the service attempts made prior to the warning order, the appellate court held that these attempts were irrelevant because they were not initially described in the affidavits for warning order. The bank “was required to show what efforts it made, if any, to locate Montrevel before it sought constructive service by a warning order. U.S. Bank did not include any facts in its affidavits for a warning order to show any efforts it may have taken to diligently inquire into Montrevel’s location; therefore, service by warning order was not properly executed.”
Morgan v. Big Creek Farms of Hickory Flat, Inc.
Conversely, in Morgan, the Arkansas Court of Appeals held that Big Creek Farms properly utilized a warning order to complete service upon the defendants in an underlying lawsuit brought by Big Creek. [Morgan v. Big Creek Farms of Hickory Flat, Inc., 2016 Ark. App. 121, 488 S.W.3d 535 (Ark. Ct. App. 2016).] The parties had entered into a construction contract in 2008. Construction was completed in 2009, and Big Creek attempted multiple times to collect payment pursuant to the contract.
Big Creek filed suit in late 2011 to recover the amount owed. On four occasions Big Creek attempted personal service by sheriff at the Morgans’ address without success. During these attempts, the sheriff’s department identified another address where the property’s utility bills were being mailed. Big Creek hired a private investigator who confirmed this new address as a possible address. Personal service was again attempted three times on the Morgans at the new-found address; these attempts were unsuccessful. Further, after two unsuccessful service attempts by certified and first-class mail at the first address, Big Creek filed and was granted an extension of time. Subsequently, Big Creek filed an affidavit for warning order, detailing these attempts. Service by warning order was conducted. Big Creek was eventually granted a default judgment against the Morgans in 2012, which the Morgans learned of the next year.
In 2014 the Morgans filed a motion to set aside the default judgment. Their motion was denied and they appealed the decision, which the Court of Appeals of Arkansas denied as well. The appellate court’s reasoning was that the affidavit for warning order clearly demonstrated “diligent inquiry” through the inclusion of process server and private investigator affidavits, as well as an explanation of those efforts.
These two cases provide some guidelines as to what Arkansas courts consider valid constructive service. A blanket statement that diligent inquiry was made but was unsuccessful — as described in the Billings decision — is not sufficient. Additionally, attempting to prove diligent inquiry after the fact is insufficient. It is common practice that warning orders are utilized as a last resort for service upon defendants, and the language of Rule 4(f) dictates this. Only after diligent inquiry has been conducted may a warning order be issued.
However, suppose affidavits and receipts of attempted service are attached as exhibits to the warning order affidavit, but not described within the body of the affidavit. In theory, incorporating exhibits makes whatever is contained in the exhibits a part of the pleadings. To some, this seems to be sufficient for it to “appear” that diligent inquiry was conducted by the party seeking the warning order. However, the Court of Appeals of Arkansas has not yet ruled on this.
Rule 4(f) is not clear in describing the extent to which a party must prove its diligent inquiry. The most instruction provided by the rule indicates that it must “appear by the affidavit” that diligent inquiries were made. As summarized in this article, the Court of Appeals has held in two starkly different cases what it will (and will not) consider diligent inquiry for purposes of a warning order. The policy consideration at issue in these cases is clear: one should not be able to constructively notify a defendant of a pending lawsuit without first deliberately attempting to give the defendant actual notice. Any other determination would cause an increase in unnecessary default judgments — those situations where a defendant may have been able to, and desired to, defend his or her interest. The challenge now will be to analyze and predict how Arkansas courts will handle constructive service with facts that fall somewhere between the scenarios reviewed in Billings and in Morgan.
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