The Huntington National Bank v. Car-X Associates Corp. , 22 N.E.3d 687 ( 2014 )


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  • FOR PUBLICATION                                Dec 02 2014, 10:02 am
    ATTORNEY FOR APPELLANT:                    ATTORNEY FOR APPELLEE:
    JOHN DAVID CROSS                           CHRISTOPHER M. KEEFER
    Mercer Belanger, P.C.                      Sopko, Nussbaum, Inabnit & Kaczmarek
    Indianapolis, Indiana                      South Bend, Indiana
    IN THE
    COURT OF APPEALS OF INDIANA
    THE HUNTINGTON NATIONAL BANK,              )
    )
    Appellant,                           )
    )
    vs.                           )       No. 64A04-1405-MF-227
    )
    CAR-X ASSOCIATES CORP.,                    )
    )
    Appellee.                            )
    APPEAL FROM THE PORTER SUPERIOR COURT
    The Honorable William E. Alexa, Judge
    Cause No. 64D02-1401-MF-398
    December 2, 2014
    OPINION - FOR PUBLICATION
    BROWN, Judge
    The Huntington National Bank (“Huntington”) appeals the trial court’s denial of its
    motion to set aside default judgment in favor of Car-X Associates Corp. (“Car-X”).
    Huntington raises one issue, which we restate as whether the court erred or abused its
    discretion in denying its motion to set aside default judgment. We reverse and remand.
    FACTS AND PROCEDURAL HISTORY
    On January 8, 2014, Car-X filed a complaint to foreclose a judgment lien it had
    obtained in 2013 against real property owned by Susanne and Terry Wood in the amount of
    $200,359.90 plus fees, costs, and post-judgment interest. The complaint named Huntington
    as a defendant because Huntington held a mortgage on the property which secured a loan to
    the Woods made in 2005 in the original principal amount of $310,500. The complaint and
    summons were served upon Huntington’s registered agent for service of process by certified
    mail on January 27, 2014.
    Paul Burnside was the Foreclosure Supervisor for Huntington. In his affidavit,
    Burnside stated he received service of Car-X’s complaint on or about January 28, 2014, and
    referred the matter to counsel on February 25, 2014. Burnside further stated that the
    individual in his department who typically received service of process for Huntington was on
    a medical leave of absence when Huntington received service; that in addition to his regular
    duties he was assisting the individual who typically received service of process for
    Huntington during her leave of absence; that his regular duties included supervision of
    Huntington’s pre-sale foreclosure staff, review of daily reports and updates, oversight of the
    foreclosure attorney network, and daily review of compliance with investor and
    2
    governmental guidelines; and that he received the summons in the case but due to the volume
    of his regular duties was unable to timely refer the matter to counsel.
    On February 25, 2014, Car-X moved for default judgment against Huntington. On
    February 27, 2014, the trial court granted Car-X’s motion and specifically found that “Car-
    X’s interest in and to the real estate . . . is prior and superior to any and all interests, estates,
    rights, titles, claims, liens, and/or encumbrances of Huntington.” Appellee’s Appendix at 50.
    The practical result of the default judgment was to make Huntington’s mortgage subordinate
    to the judgment lien of Car-X. On March 14, 2014, counsel for Huntington filed an
    appearance, an answer, and a motion to set aside the default judgment. After conducting a
    hearing, the trial court denied Huntington’s motion on April 24, 2014. Huntington now
    appeals.
    DISCUSSION
    The issue is whether the trial court erred or abused its discretion in denying
    Huntington’s motion to set aside default judgment under Ind. Trial Rule 60(B). Upon
    appellate review of a refusal to set aside a default judgment, the trial court’s ruling is entitled
    to deference and will be reviewed for an abuse of discretion. Allstate Ins. Co. v. Watson, 
    747 N.E.2d 545
    , 547 (Ind. 2001). The trial court’s discretion should be exercised in light of the
    disfavor in which default judgments are generally held. Id.; see also Coslett v. Weddle Bros.
    Constr. Co., 
    798 N.E.2d 859
    , 861 (Ind. 2003) (“Indiana law strongly prefers disposition of
    cases on their merits.”), reh’g denied.
    3
    Huntington contends in part that the trial court erred in finding that its delay was not
    the result of excusable neglect. Huntington specifically argues that the employee who
    typically received service of process was away on maternity leave, that Burnside covered for
    the woman, that Burnside does not typically receive service of process and added this job to
    his regular duties, and that, due to the volume of his regular duties, Burnside did not refer the
    matter to counsel until February 25, 2014, just six days after its deadline to respond to the
    complaint.
    Car-X responds that the trial court did not abuse its discretion in entering default
    judgment and that the record demonstrates the court weighed the facts of the case. Car-X
    argues that Huntington is a large bank which had staffed at a minimum an employee and
    supervisor charged with, among other things, receiving service of process and overseeing the
    foreclosure attorney network. Car-X notes that the court found Huntington’s neglect was not
    excusable under the circumstances and that there is nothing in the record demonstrating that
    it abused its discretion in doing so. Car-X also states that Huntington asserts for the first time
    in its appellant’s brief that the employee was out on maternity leave1 and that it would seem
    this employee would have had ample time to make all arrangements relative to her workload
    including receiving and handling of service of process.
    Default judgments are not favored in Indiana. Shane v. Home Depot USA, Inc., 
    869 N.E.2d 1232
    , 1234 (Ind. Ct. App. 2007). Any doubt as to the propriety of a default judgment
    must be resolved in favor of the defaulted party. 
    Watson, 747 N.E.2d at 547
    . “Moreover, no
    1
    As noted, Burnside’s affidavit states that the employee was on a medical leave of absence.
    4
    fixed rules or standards have been established because the circumstances of no two cases are
    alike.” Kmart v. Englebright, 
    719 N.E.2d 1249
    , 1253 (Ind. Ct. App. 1999) (citing Siebert
    Oxidermo, Inc. v. Shields, 
    446 N.E.2d 332
    , 340 (Ind. 1983)), trans. denied. “A cautious
    approach to the grant of motions for default judgment is warranted in ‘cases involving
    material issues of fact, substantial amounts of money, or weighty policy determinations.’” 
    Id. (citing Green
    v. Karol, 
    168 Ind. App. 467
    , 473-474, 
    344 N.E.2d 106
    , 110-111 (1976)). In
    addition, the trial court must balance the need for an efficient judicial system with the judicial
    preference for deciding disputes on the merits. 
    Id. The entry
    of a default judgment is authorized by Ind. Trial Rule 55(A), and pursuant
    to Trial Rule 55(C) a judgment by default which has been entered may be set aside by the
    court for the grounds and in accordance with the provisions of Trial Rule 60(B). Huntington
    cited to Ind. Trial Rule 60(B)(1) in its motion to set aside default judgment. Ind. Trial Rule
    60(B) provides in part that “[o]n motion and upon such terms as are just the court may relieve
    a party or his legal representative from a judgment, including a judgment by default, for the
    following reasons: (1) mistake, surprise, or excusable neglect; . . . .” Ind. Trial Rule
    60(B)(1). A motion shall be filed not more than one year after the judgment was entered for
    purposes of Trial Rule 60(B)(1), and a movant filing a motion under Trial Rule 60(B)(1)
    must allege a meritorious claim or defense. “A Trial Rule 60(B)(1) motion does not attack
    the substantive, legal merits of a judgment, but rather addresses the procedural, equitable
    grounds justifying the relief from the finality of a judgment.” 
    Kmart, 719 N.E.2d at 1254
    (citing Blichert v. Brososky, 
    436 N.E.2d 1165
    , 1167 (Ind. Ct. App. 1982)). We have
    5
    held that “relief from judgment is essentially equitable in nature and, thus, a trial court must
    balance the alleged injustice suffered by the party moving for relief against the interests of
    the winning party and society in general in finality of litigation.” 
    Id. at 1257
    (citing King v.
    King, 
    610 N.E.2d 259
    , 262 (Ind. Ct. App. 1993), reh’g denied, trans. denied).
    There is no general rule as to what constitutes excusable neglect under Trial Rule
    60(B)(1). 
    Id. at 1254
    (citing In re Marriage of Ransom, 
    531 N.E.2d 1171
    , 1172 (Ind. 1988)).
    Each case must be determined on its particular facts. 
    Id. (citing Boles
    v. Weidner, 
    449 N.E.2d 288
    , 290 (Ind. 1983)). The following facts have been held to constitute excusable
    neglect, mistake, or surprise:
    (a) absence of a party’s attorney through no fault of party; (b) an agreement
    made with opposite party, or his attorney; (c) conduct of other persons causing
    party to be misled or deceived; (d) unavoidable delay in traveling; (e) faulty
    process, whereby party fails to receive actual notice; (f) fraud, whereby party is
    prevented from appearing and making a defense; (g) ignorance of the
    defendant; (h) insanity or infancy; (i) married women deceived or misled by
    conduct of husbands; (j) sickness of a party, or illness of member of a family.
    
    Id. (citing Cont’l
    Assurance Co. v. Sickels, 
    145 Ind. App. 671
    , 675, 
    252 N.E.2d 439
    , 441
    (1969)). “Although a default judgment plays an important role in the maintenance of an
    orderly, efficient judicial system as a weapon for enforcing compliance with the rules of
    procedure and for facilitating the speedy determination of litigation, in Indiana there is a
    marked judicial deference for deciding disputes on their merits and for giving parties their
    day in court, especially in cases involving material issues of fact, substantial amounts of
    money, or weighty policy determinations.” Charnas v. Estate of Loizos, 
    822 N.E.2d 181
    ,
    184-185 (Ind. Ct. App. 2005).
    6
    Even though there is a technical default, the non-defaulting party is not entitled to a
    judgment by default as a matter of right. 
    Green, 168 Ind. App. at 473
    , 344 N.E.2d at 110.
    This court has considered the amount of money involved, the material issues of fact
    accompanying the allegations, the short length of the delay, and lack of prejudice to the non-
    movant by the delay in concluding that a trial court did not abuse its discretion in allowing a
    case to be heard on the merits. See 
    id. at 475,
    344 N.E.2d at 111.
    Here, Huntington’s deadline to file a responsive pleading to Car-X’s complaint to
    foreclose a judgment lien was February 19, 2014, twenty-three days after service of the
    complaint on January 27, 2014. See Trial Rule 6(C) (providing a responsive pleading shall
    be served within twenty days after service of the prior pleading); Trial Rule 6(E) (providing
    that three days shall be added to the prescribed period when the service of a notice of other
    paper is served by mail). Car-X moved for default judgment six days later on February 25,
    2014, and the court entered default judgment two days after that, on February 27, 2014.
    Huntington’s counsel filed an answer and motion to set aside default judgment fifteen days
    later on March 14, 2014. In addition, Huntington holds a mortgage on the property that
    secured a loan to the Woods in 2005 in the original principal amount of $310,500. Further,
    Car-X does not argue, and the evidence does not establish, that Huntington’s delay
    prejudiced Car-X, given that the priority of the parties’ security interests in the Woods’
    property can be resolved based on the dates of the recorded instruments evidencing the
    parties’ respective security interests, and the availability of those instruments was not
    impacted by Huntington’s delay.
    7
    Based upon the record, and in light of the short length of the delay, the security
    interest of Huntington and the amount at issue, the absence of evidence of prejudice to Car-X
    by the delay, and the severity of the sanction of default judgment, we conclude that
    Huntington’s failure to respond to Car-X’s complaint constituted excusable neglect under
    Trial Rule 60(B)(1). See Fulton v. Van Slyke, 
    447 N.E.2d 628
    , 637 (Ind. Ct. App. 1983)
    (noting that courts may consider factors including the amount of money involved, the length
    of time between the judgment and the request for relief, and lack of prejudice in reviewing
    the reinstatement of a cause of action, finding that many of the factors were present as Van
    Slyke had a foreign judgment for the substantial amount of $143,000, that only a sixteen-day
    period elapsed between the judgment and the initial attempt to set aside the judgment, and the
    estate had not demonstrated any way in which it would be prejudiced by reinstatement, and
    holding that considering the severity of the sanction the trial court did not abuse its discretion
    in allowing the claim to be set for a hearing on the merits), reh’g denied.
    In order to obtain relief under Trial Rule 60(B)(1), Huntington must also show it
    alleged a meritorious claim or defense. The rule by its terms requires only an allegation of a
    meritorious defense. See Ind. Trial Rule 60(B) (“A movant filing a motion for reasons (1) . .
    . and (8) must allege a meritorious claim or defense.”) (Emphasis added). “A meritorious
    defense is one demonstrating that, if the case was retried on the merits, a different result
    would be reached.” Baxter v. State, 
    734 N.E.2d 642
    , 646 (Ind. Ct. App. 2000). To establish
    a meritorious defense, a party need not prove the absolute existence of an undeniable
    defense. Bunch v. Himm, 
    879 N.E.2d 632
    , 637 (Ind. Ct. App. 2008). Rather, a defendant
    8
    need only make a prima facie showing of a meritorious defense indicating to the trial court
    the judgment would change and that the defaulted party would suffer an injustice if the
    judgment were allowed to stand. 
    Id. In its
    motion to set aside default judgment, Huntington stated that its meritorious
    claim and defense is that it holds a first mortgage on the property, recorded in October 2005,
    that is a superior interest to the judgment lien of Car-X which was entered in July 2013.
    Huntington attached to its motion to set aside default judgment the instruments upon which
    its allegations are based, including the October 2005 promissory note and the mortgage
    securing the loan. The mortgage is file-stamped showing it was recorded in the Porter
    County Recorder’s Office on October 19, 2005, as instrument number 2005-032035.
    Huntington has alleged that the result of the proceedings would be different if the default
    judgment were set aside and thus has established a meritorious claim or defense.
    Finding that Huntington has established that it was entitled to relief from the default
    judgment by demonstrating excusable neglect and a meritorious defense, we conclude the
    trial court abused its discretion in denying Huntington’s Trial Rule 60(B)(1) motion to set
    aside the default judgment.
    CONCLUSION
    For the foregoing reasons, we reverse the judgment of the trial court and remand for
    further proceedings consistent with this opinion.
    Reversed and remanded.
    9
    BRADFORD, J., concurs.
    BARNES, J., dissents with separate opinion.
    10
    IN THE
    COURT OF APPEALS OF INDIANA
    THE HUNTINGTON NATIONAL BANK,                     )
    )
    Appellant,                                 )
    )
    vs.                                 )     No. 64A04-1405-MF-227
    )
    CAR-X ASSOCIATES CORP.,                           )
    )
    Appellee.                                  )
    BARNES, Judge, dissenting
    I understand the reasoning of my colleagues in the majority here. I respectfully do not
    agree with it. I do not believe that Huntington proved that excusable neglect led to its delay
    in responding to Car-X’s complaint, as required to grant a motion for relief from judgment
    under Indiana Trial Rule 60(B)(1).
    The record before us indicates that the person at Huntington who was designated to
    receive pleadings of the type filed here was unavailable to discharge her duties for some
    period of time because of maternity leave. Huntington evidently failed to take adequate steps
    to cover these duties in her absence. The time period for responding to the complaint ran
    and, although Huntington acted fairly promptly after the error was discovered, it still was at
    least twenty days after the deadline when it did so.
    11
    To me, this case is virtually indistinguishable from Smith v. Johnston, 
    711 N.E.2d 1259
    (Ind. 1999), where our supreme court addressed a very similar fact pattern and held it
    did not establish excusable neglect. In that case, a doctor was timely served with notice of a
    medical malpractice complaint. The doctor’s office manager ordinarily handled legal affairs,
    but he was out of the office and in the process of quitting his job when the complaint was
    received and signed for by a nurse. The nurse placed the complaint on the doctor’s desk, but
    the doctor did not look at it until after default judgment was entered. The doctor moved for
    relief from judgment, which the trial court denied.
    Our supreme court rejected the doctor’s claim that his failure to read the complaint in
    a timely fashion constituted excusable neglect under Trial Rule 60(B)(1). I quote extensively
    from the court’s reasoning, which is highly informative in this case:
    This is neglect, but not excusable neglect as the term appears in
    Rule 60(B)(1). Smith was aware that the person who normally
    handled legal mail was no longer doing that job. Nonetheless,
    Smith ignored his mail, including the summonses and motion for
    default. We do not agree that the failure of Smith to read his
    mail amounts to a breakdown in communication sufficient to
    qualify as excusable neglect under Trial Rule 60(B)(1). Smith’s
    case is distinguishable from our previous decisions finding
    excusable neglect for a breakdown in communication. In those
    cases the defendants did all that they were required to do but
    subsequent misunderstandings as to the assignments given to
    agents of the defendants resulted in the failure to appear. In
    Whittaker [v. Dail, 
    584 N.E.2d 1084
    (Ind. 1992)], the insurance
    adjuster believed she had employed an attorney to defend the
    insured but the attorney thought he was to institute a declaratory
    judgment against the 
    insured. 584 N.E.2d at 1086
    ; see also
    Boles v. Weidner, 
    449 N.E.2d 288
    , 290 (Ind. 1983) (breakdown
    in communication between the independent agent and the
    insurance agency). Here, Smith knew his mail was unattended
    and accepted the risk of adverse consequences. The judicial
    12
    system simply cannot allow its processes to be stymied by
    simple inattention. There may be cases where a trial court will
    find excusable neglect based on similar omissions due to
    external pressures on a sympathetic defendant, but it was not an
    abuse of the trial court’s discretion to refuse to do so here.
    
    Smith, 711 N.E.2d at 1262
    . The Smith court went on to hold that the doctor was entitled to
    relief from judgment under Trial Rule 60(B)(3) based on misconduct of opposing counsel.
    
    Smith, 711 N.E.2d at 1264
    . Because of this, the court’s discussion regarding Trial Rule
    60(B)(1) might be regarded as dicta not essential to resolution of the case. Still, I presume
    that the court’s extended discussion and analysis of Trial Rule 60(B)(1) accurately reflects its
    view of that Rule’s requirements. I also observe that, in deciding whether excusable neglect
    existed, our supreme court did not take into consideration factors such as the amount of
    money involved, the existence of material issues of fact, the length of the delay, or whether
    the non-movant was prejudiced by the delay. Cf. 
    Green, 168 Ind. App. at 473
    , 344 N.E.2d at
    110.
    Excusable neglect to me is just that: excusable neglect, not just neglect. It is
    something that can be explained by an unusual, rare, or unforeseen circumstance, for
    instance. One employee’s maternity leave is not such a circumstance and should not be used
    as an excuse for delaying judicial proceedings beyond the clear deadlines set by our Trial
    Rules, especially where a large and sophisticated party such as Huntington is concerned. I
    would defer to the trial court’s exercise of its discretion in this matter, and I vote to affirm its
    denial of Huntington’s motion for relief from judgment.
    13