Court Opinion

ID: 6550314
Source: CourtListenerOpinion
Date Created: 2022-07-19 22:24:21.696412+00
Date Added: 2024-06-11T15:56:05.436757
License: Public Domain

Tom Glaze, Judge, dissenting. I believe the case law in Schulte v. Walthour, 239 Ark. 627, 393 S.W.2d 242 (1965), and Fox v. Pinson, 182 Ark. 936, 34 S.W.2d 459 (1930), requires this case to be affirmed.1 Before discussing the rules of law found in Schulte and Pinson, a brief analysis of the facts in the instant case is necessary. The facts are not complicated and sequentially, the relevant facts are as follows: 1. Briggs filed a mortgage foreclosure action and obtained valid service on Worsham, Britton, Harris, Standley, Spring Lake Shores, Inc., and Hodge. Hodge was named because he might claim an interest in the subject property by virtue of a second mortgage. Briggs prayed, among other things, that his interests in the property be declared superior to all of the named defendants’ interests. 2. Britton was the only party who filed an answer to the Briggs complaint. Hodge and the others defaulted. 3. Britton also filed a counterclaim against Briggs and a cross-complaint against Worsham and Spring Lake Shores, Inc. (Spring Lake). Britton’s counterclaim and cross-complaint were based on a note, mortgage and assignment which had been recited in Briggs’ foreclosure complaint as being the basis upon which Britton might claim an interest in the subject property. In her actions, Britton sought judgment against Briggs, Worsham and Spring Lake and that the judgment be held to constitute a first and prior lien on the property. Hodge was never served a copy of Britton’s counterclaim or cross-complaint. 4. The court subsequently entered its decree finding all parties had been duly served with process and that Briggs and Britton were the only ones to appear for the hearing. It found that Standley and Harris had no interest or lien in the property and that if Hodge had any interest, it was by virtue of a mortgage which was subordinate to the liens of Briggs and Britton. 5. Hodge filed a motion to set aside the court’s decree. This occurred eight days after the decree was entered and nearly two years after the Briggs foreclosure suit was filed and served on Hodge. The factual issue is simple: Whether Britton was required to serve Hodge with a copy of her counterclaim and cross-complaint in the pending Briggs foreclosure suit even though (1) Hodge already had been made a party to the original foreclosure action, (2) Britton’s cause of action in her counterclaim and cross-complaint recited the claim upon which Britton might assert an interest in the property and which, in fact, did serve as the basis of Britton’s cause of action alleged in her counterclaim and cross-complaint. I believe service of the cross-complaint on Hodge was not necessary and that my position on this point is supported by the rules announced in Schulte v. Walthour, supra, and Fox v. Pinson, supra. Procedurally, Schulte involved a complaint-in-intervention rather than a cross-complaint. Otherwise, the issue considered by the Supreme Court is strikingly similar to the one posed in the instant case. In Schulte, Holmes, a contractor, commenced building homes on properties owned by his wife. Walthour held four mortgages on the properties. Holmes became unable to complete the work, and Walthour foreclosed against the Holmeses. Walthour also named Big Rock Stone and Robinson Lumber Company as material lien holders. Schulte, a painting contractor who did work on the homes, was not made a party-defendant by Walthour. However, Schulte later intervened, seeking judgment for his services. He acquired service on Walthour but not on the Holmeses. Their summons was returned non est. The trial court held Schulte, did not acquire a lien against the subject property because his complaint-in-intervention had not been served on the Holmeses. The principal question on appeal was whether Schulte, an intervening party, was required to obtain service on the Holmeses before he could claim a lien against the property. The Supreme Court reversed the trial court, holding that the Holmeses were parties to the litigation, and they were required to take notice of all subsequent proceedings relating to the pending litigation. The Supreme Court’s decision in part was based on the fact that Walthour’s original action essayed, inter alia, to establish priority of liens between himself, as mortgage holder, and the lien holders, Big Rock and Robinson Lumber Company. Accordingly, the court held it was entirely in order for the trial court to permit Schulte to intervene, since the same property was involved and his claim presented the same legal question. The court stated: “Appellant complains that the judgment by default was rendered without summons having been issued on the intervention or served on it, and it had no notice that the intervention had been filed. This would be of no avail to the appellant. An intervention is not an independent proceeding where it is against the plaintiff in the original action, but is ancillary and supplemental to the main case. In a suit where there is an intervention, the original parties are already in the court and must take notice of all subsequent proceedings relating to the subject-matter, including intervening petitions.” (Emphasis supplied). Schulte v. Walthour, 239 Ark. at 631, 393 S.W.2d at 244 (quoting Arkansas Bond Co. v. Harton, 191 Ark. 665, 67 S.W.2d 52 [1935]). The reasoning and logic employed by the Supreme Court in Schulte should be recognized in the instant case. The original action filed by Briggs involved the same property. Additionally, the claims and issues raised by Britton in her counterclaim and cross-complaint are consistent with and based upon the same allegations as set forth in Briggs’ foreclosure complaint. From the time the original action was filed, the common issue for all the parties involved the establishment of priority of liens. Once Hodge knew his lien interests in the subject property were involved in the foreclosure action, he had a duty to exercise due diligence in following all subsequent proceedings in the suit which might affect his interests. Before leaving this point, I address the majority’s attempt to distinguish Schulte v. Walthour. In sum, the majority contends that interventions, unlike cross-actions, are not independent actions but merely ancillary proceedings. Thus, while the original parties must take notice of subsequent pleadings when an intervention is filed, this rule is inapposite in cases in which cross-actions are filed. This simply is not true, and the case of Fox v. Pinson, 182 Ark. 936, 34 S.W.2d 459 (1930) — cited by the majority — contradicts its position on this point. The Court in Pinson stated the general rule that cross-complaints are in the nature of independent suits, and parties defendant are required to be served in cross-complaints as in original complaints. However, the Court stated further that there is a distinction between cross-complaints that are merely defensive and those that seek affirmative relief. It concluded: If Mrs. Fox had merely made allegations in her cross-complaint which would entitle her to damages by way of defense to the foreclosure suit, this would not have made her cross-complaint an independent action. As I have already stated, Britton’s cross-complaint alleged nothing new; she sought damages and entitlement to a lien which were by way of a defense to Briggs’ foreclosure action. If Britton had asserted a new, independent cause, the ruling case law would have required such cross-complaint to have been served upon Hodge. That was not the situation here. In conclusion, Hodge argues that he possesses a valid second mortgage which, he admits, is inferior to that held by Briggs. He claims, however, that his mortgage has priority over Britton’s mortgage which was recorded after Hodge’s. Contrary to Hodge’s contention, no evidence was presented to the trial court that Hodge held a valid, enforceable note and second mortgage. The only reference to Hodge’s possible interest is reflected in the Briggs complaint which alleged that Hodge “may claim an interest in said lands by virtue of a second mortgage....” The court decreed that the mortgage lien of Hodge, if any, was subordinate and inferior to the liens of Briggs and Britton. Hodge defaulted after being duly served, he presented no evidence and he is now too late to assert a defense he should have interposed over two years ago. Hodge was subject to the personal jurisdiction of the trial court, and the court was fully authorized to determine the priority of the various parties’ interests. I believe the trial court was correct in denying Hodge’s motion to set aside the court’s decree. He simply sat on his rights and should not be heard to complain at this late date.   The Arkansas Rules of Civil Procedure were adopted effective July 1, 1979. Rules 5 (a) and 24 may well affect the prior Supreme Court holding in Schulte v. Walthour and Fox v. Pinson. These Rules were not argued before the trial court nor were they argued in this appeal.