Attorney Jim Harris said the $100,000 judgment against Gary Phillips was not decided on the merits of the case, but was a result of a technicality.
Last Wednesday, the Arkansas Court of Appeals affirmed a Mississippi County Circuit Court ruling that former Blytheville Waterworks General Manager Phillips is personally responsible for the $100,000 copier debt to De Lage Landen Financial Services.
Mississippi County Circuit Court Judge Richard Lusby ruled on Feb. 7, 2017 that, based on Phillips failure to answer the complaint, he admitted that his signature was on the lease agreements; that he did not have the authority to execute the lease agreements on the city of Blytheville’s behalf; that he received the leased property; that he did not make the payments; and that he owed $99,049.65 plus 10 percent postjudgment interest and $1,715 in cost and attorney’s fees.
“A good comparison to that would be, let’s say Arkansas State and the Razorbacks agreed to play football on a Saturday in Jonesboro,” Harris said. “Let’s say the Razorbacks are on their way to Jonesboro and their bus breaks down and they can’t get to Jonesboro, so they have to forfeit the ballgame. Technically, Jonesboro wins the ballgame, but they never played the game. In essence that’s exactly what happened here. Then you’ve got Jonesboro walking around, telling everybody we beat the Razorbacks, but you beat them on a technicality because their bus broke down on the way to Jonesboro. You didn’t beat them on the field. And that’s exactly what happened here. They beat Gary on a technicality; they certainly didn’t beat him in the courtroom because he had a meritorious defense. If we would have went to court, I say they never would have gotten a penny judgment against Gary Phillips.”
Harris pointed out the initial complaint was filed against the city of Blytheville and De Lage later amended it to add Phillips.
“He had no reason to answer the first complaint because he was not a defendant,” Harris said. “And then the second complaint, he didn’t file an answer because he didn’t think that he needed to file an answer because all the equipment was at the water department and he thought that it was the city’s responsibility. He was an agent for the city while he worked for the water department.”
According to Harris, typically when a defendant doesn’t file an answer, the plaintiff will seek a default judgment with a hearing as to damages following.
“In this case, what happened is even though Gary had never filed an answer to the original complaint, De Lage filed a request for interrogatories and request for admissions and had those served on Gary,” Harris said. “Well, Gary never responded to the interrogatories or admissions and then after 30 days if you don’t respond to a request for admissions, they are deemed to be admitted. So, then they come in, instead of moving for a default judgment they filed a motion for a summary judgment based on the fact that Gary never filed an answer to the original complaint and he failed to respond to the request for admissions. Everything they requested that he admit was deemed admitted for his failure to respond. Ultimately, now they get a judgment against him. That, to me, is unbelievable because they actually got a judgment for the exact penny as if that lease had been fully executed to the end for every dollar they would have collected.”
He said he has never seen anyone that failed to answer a lawsuit be served interrogatories and request for admissions and then the plaintiff seek a summary judgment instead of a default.
Harris noted the leased equipment was also returned to the company.
“Gary got hit double hard on that,” Harris said.
The attorney contends Phillips had the authority to enter into the agreements as general manager of Waterworks.
Harris added there was a manufacturer’s rebate with each of the copy machines — money that the city deposited.
“You can trace that money to the penny of those rebate checks were all deposited in the Blytheville Waterworks account,” Harris said. “So, it wasn’t like Gary personally benefited from anything.”
He said there were four sets of the leases; only two companies filed suit.
Harris said the “Gary Phillips defense” didn’t work in Iowa.
In the case filed in Iowa, the city had to pay $25,446.11 for Iowa attorney fees, plus the settlement costs of around another $30,000.
“That’s the same thing that would have happened here if we would have gotten to play the game in the courtroom,” Harris said.
Harris said Phillips didn’t have an attorney at the time that he failed to answer the complaint.
Also, Harris said there was a clause in the lease agreements that stipulated if the city council didn’t appropriate the money for the leases, they would have been voided per the contract.
“That’s how easy it would have been for the city and Gary to have had zero liability,” Harris said. “In December, they could have had a council meeting and then somebody could have said, ‘I make a motion that we don’t fund these copy machines’ and somebody else says I second that motion. And we have a vote and say we are not appropriating the money for these copy machines and the leases are gone. No liability attached.”
Phillips is also facing felony theft charges. He is accused of stealing $79,177.39 from Waterworks from Aug. 1, 2012 to Sept. 30, 2014, according to reports.
Last Monday, Mississippi County Circuit Court Judge Cindy Thyer rescheduled the motion and plea day to April 26 and the jury trial for May 13-17.