Kevin W. Layman v. James Larry Bone

Kevin W. LAYMAN v. James Larry BONE

97-948                                             ___ S.W.2d ___

                    Supreme Court of Arkansas
                  Opinion delivered May 7, 1998


1.   Civil procedure -- enlargement of time for filing answer -- trial court did not abuse
     discretion in denying. -- Arkansas Rule of Civil Procedure 6(b)(2),
     as amended in 1990, allows a trial court, "in its discretion,"
     to enlarge the time for answering, even after the initial
     period for answering has passed; the revision of the rule
     enlarged the discretion of the trial courts to permit late
     answers, but it did not require them to permit such answers in
     any circumstance; where appellant's actions might have been
     best characterized as "neglect" that was not "excusable"
     rather than "mistake," the supreme court could not say that
     the trial court abused its discretion in declining to enlarge
     the time for appellant to file his answer.

2.   Civil procedure -- default judgment -- basic rule. -- Under Ark. R. Civ. P.
     55(a), when a party against whom a judgment for affirmative
     relief is sought has failed to appear or otherwise defend as
     provided by the rules of civil procedure, judgment by default
     may be entered by the court; no criteria for considering the
     motion are provided in the rule.

3.   Civil procedure -- default judgment -- setting aside -- meritorious defense required. -
     - Among other things, Ark. R. Civ. P. 55(c) requires the party
     moving to set aside a default judgment to demonstrate a
     meritorious defense, except in cases where the judgment is
     alleged to be void.

4.   Civil procedure -- timely answer -- trial court did not abuse discretion in finding
     no mistake or other reason for appellant's failure to comply with requirement. -- The
     supreme court did not reach the question whether a meritorious
     defense to a default judgment had been demonstrated because it
     could not say that there was an abuse of discretion in the
     trial court's ruling that there was no mistake, inadvertence,
     surprise, excusable neglect, or other just cause for
     appellant's failure to comply with the requirement of a timely
     answer under Ark. R. Civ. P. 12(a).

5.   Civil procedure -- default judgment -- granting of -- abuse-of-discretion standard
     applied on review. -- Where Ark. R. Civ. P. 55(a) provides that the
     court "may" grant a default-judgment motion in the event of
     failure to answer or otherwise defend, the appellate court
     applies an abuse-of-discretion standard in reviewing the
     granting of a default judgment pursuant to the rule; in this
     instance, an abuse of discretion was not shown, and the
     judgment was affirmed.


     Appeal from Sebastian Circuit Court; John G. Holland, Judge;
affirmed.
     Gilker & Jones, P.A., by: N. Donald Jenkins, for appellant.
     Hardin, Dawson & Terry, by: Rex M. Terry, for appellee.

     David Newbern, Justice.
     This is a default-judgment case arising from an action to
recover on a promissory note.  The payee, appellee James Larry
Bone, sued one of the makers, appellant Kevin W. Layman, for
payment.  Mr. Layman's answer was filed more than twenty days from
the date he was served, and thus it was untimely and not in
compliance with Ark. R. Civ. P. 12(a).  The Trial Court declined to
enlarge the time to file the answer and entered the default
judgment in favor of Mr. Bone, stating that there was no "mistake,
inadvertence, surprise, or excusable neglect or other just cause"
for the failure to make a timely answer.  We hold there was no
abuse of discretion and affirm the judgment.
     The operative language of the promissory note was as follows:

     WE PROMISE TO PAY TO THE ORDER OF JAMES LARRY BONE OR HIS
     ASSIGNS THE SUM OF FIVE HUNDRED SEVENTY ONE THOUSAND, FIVE
     HUNDRED SIXTY ONE AND 08\100 ($571,561.08) FOR VALUE RECEIVED,
     NEGOTIABLE AND PAYABLE AT 310 LEXINGTON AVE., FT. SMITH,
     ARKANSAS (OR WHEREVER HEREAFTER DIRECTED), WITHOUT DEFALCATION
     OR DISCOUNT, WITH INTEREST FROM THE DATE ABOVE UNTIL PAID IN
     FULL AT THE RATE OF SIX (6%) PERCENT PER ANNUM.  IN THE EVENT
     THE INDEBTEDNESS HEREBY BE NOT PAID ON MATURITY ACCORDING TO
     THE TERMS HEREOF, AND COLLECTION HEREOF IS EFFECTED BY SUIT OR
     OTHERWISE, OR SAID INDEBTEDNESS IS REDUCED TO JUDGMENT,
     THROUGH SERVICES OF AN ATTORNEY, THEN MAKERS FURTHER AGREE TO
     INDEMNIFY AND REPAY THE HOLDER ANY ATTORNEY'S FEES INCURRED
     AND PAID BY THE HOLDER NOT EXCEEDING 10% OF THE PRINCIPAL DUE,
     PLUS ACCRUED INTEREST.
     PRESENTATION, NOTICE, PROTEST AND DEMAND IS HEREBY WAIVED BY
     US.
     THE ENTIRE PRINCIPAL TOGETHER WITH INTEREST IS DUE AND PAYABLE
     ON DEMAND BY THE HOLDER.  THIS NOTE IS SECURED BY THE ASSETS
     OF INTERNET PARTNERS OF AMERICA, AND MAY BE PREPAID AT ANY
     TIME WITHOUT PENALTY.
     _______________    _______________   _______________
     K. WAYNE KING      KEVIN W. LAYMAN   JAMES LARRY BONE


Proper signatures appeared in each of the prepared blocks. 
Internet Partners of America ("IPA") was a limited-liability
company established by Mr. Layman, Mr. King, and Mr. Bone to
provide computer services to the public.
     Mr. Bone alleged that Mr. Layman owed one third of the
principal, or $190,520.36, plus interest and an attorney's fee.  
He served Mr. Layman with a summons and complaint on January 14,
1997.  The answer was due to be filed on or before February 3,
1997.
     Following his receipt of the complaint on January 14, Mr.
Layman forwarded it to his attorney who, apparently at some point
thereafter, asked Mr. Layman when he had been served.  Mr. Layman,
who had failed to note the precise date of service, incorrectly
guessed that service had occurred on January 16, 1997.  Relying on
that erroneous information, the attorney noted on his calendar that
the answer was due to be filed on or before February 5.  He
prepared the answer and, on February 3, mailed copies of it to the
office of the Circuit Court Clerk and to Mr. Bone's counsel, who
received it on February 4, 1997.  The answer was filed on that
date.
     The answer admitted the validity of the note but seemed to
suggest that IPA was the actual obligor and that Mr. Layman and the
other two partners were merely "guarantors."  It stated that Mr.
Layman did not know whether any demand had been made on IPA or the
other "guarantors." 
     Mr. Bone moved to strike Mr. Layman's answer as untimely and
for default judgment in accordance with Ark. R. Civ. P. 55(a).   
Mr. Layman responded to the motion and moved to enlarge the time
for filing his answer in accordance with Ark. R. Civ. P. 6(b)(2). 
He asserted that Mr. Bone had not been prejudiced by the delay in
the filing of the admittedly late answer.  Mr. Layman explained
that the late filing was "due to the inadvertence and mistake of
his attorney who did not ascertain from the Defendant the exact
date that he was served."  
     At a hearing on the matter, Mr. Layman's attorney reiterated
the statements made in his affidavit that was attached to Mr.
Layman's response to the motion for default judgment.  He
emphasized that Mr. Bone had not been prejudiced and that he had
not intentionally disregarded the twenty-day requirement but that
his error was due to mistake or inadvertence.
     The Trial Court granted the motion for default judgment. 
Remarks from the bench included the following: "It [the answer] was
not filed within 20 days, and I don't believe the failure to do so
was [the] result of mistake, inadvertence, surprise, or excusable
neglect or other just cause, so it will be judgment for the
plaintiff."
     The order directed that Mr. Layman's untimely answer should be
stricken and that Mr. Bone was entitled to judgment by default
under Rule 55.  Although the Trial Court did not expressly refer to
Mr. Layman's request under Rule 6(b)(2) to enlarge the time for
filing the answer, the language he used from the bench quoted that
of Rule 6(b)(2), and thus he clearly made a ruling refusing to
enlarge the time for answer.  Mr. Layman did not, thereafter, file
a motion under Ark. R. Civ. P. 55(c) to set aside the default
judgment.  The issues are, therefore, whether the time for filing
the answer should have been enlarged under Rule 6(b)(2) and whether
the default judgment was properly granted under Rule 55(a).

                         1. Rule 6(b)(2)
     Presumably, any failure to file an answer on time could be
referred to as a "mistake" in the sense that an error of some sort
caused the failure to file on time.  To hold, however, that any
error whatsoever should excuse compliance with Rule 12(a) would
deprive the trial courts of the discretion to which the rule
refers.  That is not the intent behind the rule.       
     In B&F Eng'g Inc. v. Cotroneo, 309 Ark. 175, 830 S.W.2d 835
(1992), two actions were brought against B&F Engineering, Inc., one
by each of two separate plaintiffs.  The first complaint was
answered in a timely manner.  The second was not, because an
insurance company representative "mistakenly" thought it was filed
in the action in which an answer had already been filed.  As in the
case now before us, there was a request to enlarge the time for
answer pursuant to Rule 6(b)(2) and an appeal from the granting of
the default judgment pursuant to Rule 55(a).
     We upheld a default judgment on the claim in response to which
the answer was filed late, and we commented that to do otherwise
would allow defendants to give "slipshod treatment" to writs of
summons.  Id. at 178, 830 S.W.2d  at 837.  In this case, as in B&F
Eng'g v. Cotroneo, supra, the actions of the defendant might be
best characterized as "neglect" that was not "excusable" rather
than "mistake."  Counsel relied on his client's faulty recollection
as to when he had been served instead of checking the record to
ascertain that fact.  
     Rule 6(b)(2) was amended in 1990 to make it compatible with
our move to "liberalize" Rule 55 and the standards for granting
default judgments.  It allows a trial court, "in its discretion," 
to enlarge the time for answering, even after the initial period
for answering has passed.  See Edwards v. Szabo Food Serv., Inc.,
317 Ark. 369, 373, 877 S.W.2d 932, 935 (1994)("This rule clearly
recognizes that the trial court may act after the expiration of a
specified period of time under the Rules of Civil Procedure."). 
The revision of the rule enlarged the discretion of the trial
courts to permit late answers, but it did not require them to
permit such answers in any circumstance.  We cannot say that the
Trial Court in this instance abused his discretion.

                          2. Rule 55(a)
     Although it is necessarily a closely related question, we must
respond separately to the argument that, regardless of the decision
with respect to enlargement of the time to answer, it was an abuse
of discretion for the Trial Court to have awarded the default
judgment pursuant to Rule 55(a).  That is the basic default-
judgment rule.  It provides: "When a party against whom a judgment
for affirmative relief is sought has failed to appear or otherwise
defend as provided by these rules, judgment by default may be
entered by the court."  No criteria for considering the motion are
provided in the rule.
     The reporter's note under Rule 55(a) suggests we should
consider "whether the court would later set aside the default
judgment under Rule 55(c)."  That is what we did in B&F Eng'g, Inc.
v. Cotroneo, supra, citing federal-court cases in which opposition
to a motion for default judgment was considered as a motion to set
aside.  We also referred to the standards provided in Rule 55(c),
although there had been no motion to set aside the default
judgment.  In addition to terminology much the same as that found
in Rule 6(b)(2), Rule 55(c) requires the party moving to set aside
a default judgment to "demonstrate a meritorious defense," except
in cases where the judgment is alleged to be void.
     It has been suggested that it is improper to import the
standards of Rule 55(c) into a decision whether a default judgment
was properly granted pursuant to Rule 55(a).  See John J. Watkins,
Revised Rule 55, Five Years Later, 49 Ark. L. Rev. 23, 38 (1996).  The
trial courts in the first instance, and we upon review, must,
however, apply some standards to determine whether a motion should
be granted pursuant to Rule 55(a), and we can think of no better
ones than those stated in Rule 55(c), including the requirement
that a meritorious defense be demonstrated.       
     Whether a meritorious defense has been "demonstrated" in this
case might present an interesting issue, but we need not get to it
because, again, we cannot say that there was an abuse of discretion
in the ruling stating that there was no mistake, inadvertence,
surprise, excusable neglect, or other just cause for the failure to
comply with Rule 12(a).
     The reporter's note following Rule 55(a) suggests also that,
in applying that rule, we should look to the federal cases
interpreting the parallel federal rule and consider factors such as
lack of prejudice to the plaintiff, the defendant's preparedness to
defend, and avoidance of "largely technical" default judgments.  No
doubt those are factors that may influence a trial court in the
exercise of discretion to determine whether a mistake or
inadvertence is of the sort that should not yield a default or
whether a negligent act is excusable.
     Rule 55(a) provides that the court "may" grant a default-
judgment motion in the event of failure to answer or otherwise
defend.  Thus, we apply an "abuse of discretion" standard in
reviewing the granting of a default judgment pursuant to Rule
55(a), just as we do in reviewing the trial court's ruling on a
Rule 6(b)(2) motion to enlarge the time for answering.  Maple Leaf
Canvas, Inc. v. Rogers, 311 Ark. 171, 842 S.W.2d 22 (1992); B&F
Eng'g, Inc. v. Cotroneo, supra.  Again, in this instance an abuse
of discretion has not been shown.  
     Affirmed.