Boatman's Bank v. Steven Dunlap ( 1997 )

IN THE COURT OF APPEALS OF TENNESSEE, WESTERN SECTION
AT JACKSON
_______________________________________________________
)
BOATMEN’S BANK OF TENNESSEE, ) Shelby County Chancery Court
) No. 103622-2
Plaintiff/Appellee. )
VS.
)
) C.A. No. 02A01-9607-CH-00166
FILED
)
STEVEN K. DUNLAP and ) December 30, 1997
ABSOLUTELY HILARIOUS )
Cecil Crowson, Jr.
PRODUCTS, INC., )
Appellate C ourt Clerk
)
Defendants/Appellants. )
)
______________________________________________________________________________
From the Chancery Court of Shelby County at Memphis.
Honorable Floyd Peete, Jr., Chancellor
Harold F. Smith, Jr., Memphis, Tennessee
Attorney for Defendants/Appellants.
Richard M. Carter,
Michael A. Brady,
MARTIN, TATE, MORROW & MARSTON, Memphis, Tennessee
Attorneys for Plaintiff/Appellee.
OPINION FILED:
AFFIRMED AND REMANDED
FARMER, J.
CRAWFORD, P.J., W.S.: (Concurs)
INMAN, Sp. J.: (Concurs)
This appeal has been taken from the trial court’s order granting summary judgment
in favor of Boatmen’s Bank of Tennessee against Steven K. Dunlap and the trial court’s order
denying the motion to set aside the default judgment entered against Absolutely Hilarious Products,
Inc. For the reasons stated herein, we affirm.
FACTS
On December 7, 1993, Boatmen’s Bank of Tennessee (hereinafter, “Bank”) filed a
complaint for money judgment against Steven K. Dunlap (hereinafter, “Dunlap”) and Absolutely
Hilarious Products, Inc., (hereinafter, “AHP”) for debts allegedly due under various promissory
notes and personal guarantees. Bank sued to collect from Dunlap two promissory notes he had
made, one executed February 5, 1991, in the original amount of $254,750.00 which had an
outstanding balance of $4,552.75, and another executed January 3, 1991, in the original amount of
$350,000.00 which had an outstanding balance of $100,000.00. In addition the Bank sought to
collect from AHP a promissory note executed October 30, 1991, in the original amount of
$1,000,000.00 which had an outstanding balance of $904,380.00.
Bank represents that it hired a private process server to serve Dunlap and AHP, but
the process server was unsuccessful on at least 20 separate occasions. Therefore, on January 5, 1994,
Bank filed a Request for Service by Publication which the trial court granted by entry of order of
publication on January 7, 1994. On January 21, 1994, Bank filed the “First Amended Verified
Complaint for Money Damages, Attachment, Restraining Order, Temporary Injunction and
Permanent Injunction.” Service by publication upon Dunlap and AHP was completed on February
1, 1994. On February 15, 1994, service upon AHP was made by personal service upon AHP’s
corporate secretary, Berlyn Dunlap. Because no answer had been filed, on March 3, 1994, and
March 11, 1994, Bank filed a motion for default judgment against Dunlap and AHP. By order
entered March 18, 1994, the trial court granted the default judgment against AHP in the amount of
$948,180.98.
On April 7, 1994, Dunlap and AHP filed an answer to the First Amended Complaint.
On June 20, 1994, Dunlap and AHP served upon Bank a Rule 34 notice for production of documents
and things, and on September 16, 1994, Dunlap and AHP served Bank with a motion to compel. On
June 22, 1994, Bank filed a motion for summary judgment against Dunlap, and following a
September 20, 1994, hearing, the trial court granted summary judgment in favor of the Bank by order
entered January 26, 1996.
On October 31, 1994, AHP filed a motion to set aside the default judgment pursuant
to Rule 60.02 T.R.C.P. which motion was denied by order entered December 12, 1994. Dunlap filed
a motion on February 24, 1995, seeking to amend his April 7, 1994, answer to assert a compulsory
counterclaim. AHP filed a second motion to set aside the default judgment pursuant to Rule 60.02
T.R.C.P. on March 17, 19951. AHP sought to set aside the judgment so that it could file a
counterclaim. The trial court denied both Dunlap’s motion to amend his answer and AHP’s second
motion to set aside the default judgment by Order on Pending Motions entered January 26, 1996.
The trial court’s order also denied Dunlap’s motion to reconsider and for sanctions. On February
22, 1996, Dunlap and AHP timely filed a notice of appeal.
On October 8, 1996, Dunlap and AHP filed a third Motion to Set Aside Judgment by
Default and Summary Judgment or in the Alternative for Stay of Proceedings. Bank filed a
response, and the trial court denied AHP’s motion by order entered October 29, 1996. A second
order entered October 29, 1996, directed the release of certain funds in the amount of $28,506.49,
which had been deposited by Dunlap with the trial court clerk in partial satisfaction of the judgment.
Thereafter, Dunlap and AHP filed a second notice of appeal on November 6, 1996.
In addition to the aforementioned procedural history, Dunlap was also found to be
in contempt of court. During the proceedings, the trial court directed Dunlap to disclose various
records, and the trial court also entered an order finding Dunlap to be in contempt of court for his
failure to abide by discovery requests. On April 6, 1994, the trial court entered an injunction
prohibiting Dunlap from transferring or disposing of his assets. However, without obtaining leave
of court, Dunlap violated the injunction as follows:
1
AHP’s second motion to set aside the default judgment is not in the record on appeal;
however, it was argued as Appellant’s fifth issue on appeal.
1. During the Summer of 1994, he transferred $30,000 from his
attorney’s escrow account;
2. On February 27, 1995, Dunlap transferred a ten acre parcel of
land in Jonesboro, Arkansas, to Wyona Carter;
3. During 1995 and early 1996, Dunlap transferred some
$99,000 from his account at the First Bank of Arkansas;
4. On January 11, 1996, Dunlap liquidated his holdings at
Morgan-Keegan and Co. in Memphis, Tennessee;
5. On January 26, 1996, Dunlap transferred another ten acre
parcel of land in Jonesboro, Arkansas, to his brother, Rodney Dunlap.
On September 12, 1994, Bank moved for an order to find Dunlap in contempt of
Court for his withdrawing from his attorney’s trust account and spending $30,000 in violation of the
trial court’s previous order entered January 21, 1994. In addition to the foregoing violations of the
injunction, the trial court also found Dunlap to be in violation of the Tennessee Rules of Civil
Procedure and the trial court’s orders regarding discovery. Dunlap was scheduled to give his
deposition on April 8, 1994, but the day before his attorney canceled the deposition because Dunlap
allegedly had to be out of town on business. In fact, Dunlap was in Memphis on the day in question
but simply chose not to give his deposition. The deposition was rescheduled for April 26, 1994, and
Dunlap appeared but refused to answer questions until he had reviewed the deposition testimony
offered by his mother.
On November 7, 1995, Bank field a verified petition to hold Dunlap in contempt of
court. At a hearing held on December 7, 1995, the trial court ordered Dunlap to advise the Court of
the status of the title of a new Jeep he had purchased with proceeds from the sale of the land and to
produce the American Express records of payments and charges made since April 6, 1994. Dunlap
did not comply. On February 19, 1996, Bank filed a petition to hold Dunlap in both civil and
criminal contempt, and on February 27, 1996, Bank filed a request for production of documents in
aid of execution. Dunlap made no reply. A hearing on the Bank’s motion to compel discovery was
held on June 28, 1996, and by order entered July 9, 1996, the trial court compelled discovery
pursuant to the Bank’s requests. Subsequently on July 16, 1997, an order was entered directing
Dunlap, in lieu of a contempt hearing, to produce by July 17, 1996, his Morgan-Keegan account
statements, a copy of the 1995 Jeep title and his American Express records. That same order
instructed Dunlap to appear for his deposition on the following day, July 18, 1996. Dunlap neither
produced the requested information nor appeared for his deposition. Dunlap made a partial
production of documents on July 29, 1996, but from the documents submitted, it was apparent that
Dunlap had violated the trial court’s April 9, 1994, order prohibiting disposition of his assets.
Thereafter on August 9, 1996, Bank filed a second motion for contempt.
The petitions for contempt came to be heard on October 9, 1996, and on October 11,
1996, the trial court entered an order finding Dunlap in civil contempt for violating the April 6, 1994,
injunction, the July 9, 1996, order compelling discovery, and the July 16, 1996, order to produce the
American Express records. That same order also directed Dunlap to produce numerous records no
later than November 11, 1996. Evidently, Dunlap never complied with the trial court’s order by
producing the documents.
As previously noted the trial court entered its final order in this cause on October 29,
1996, Dunlap and AHP timely filed a notice of appeal on November 6, 1996, and this cause is
properly before this Court for consideration.
ISSUES
On appeal, Dunlap and AHP have raised the following issues:
I. Whether the trial court erred in granting Bank’s motion for
summary judgment in holding that Dunlap could not contradict his
deposition testimony by his affidavit;
II. Whether the trial court erred in granting Bank’s motion for
summary judgment while there was outstanding discovery;
III. Whether the trial court erred in granting Bank’s motion for
summary judgment while there were motions pending;
IV. Whether the trial court erred in denying Dunlap’s motion to
amend answer to file compulsory counterclaims;
V. Whether the trial court erred in denying AHP’s motion to set
aside the default judgment in order to allow it to file compulsory
counterclaims;
VI. Whether the trial court erred in denying AHP’s motion to set
aside the default judgment when Bank’s motion for default judgment
had been filed prior to an answer being due;
VII. Whether the trial court erred in denying Dunlap’s motion to
reconsider and for sanctions;
VIII. Whether the trial court erred in finding Dunlap in contempt of
court; and
IX. Whether the trial court erred in ordering the Chancery Court
Clerk’s Office to release to Bank funds on deposit.
Rule 56.04 T.R.C.P. provides that summary judgment “shall be rendered forthwith
if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any material fact and that the moving
party is entitled to a judgment as a matter of law.”
When the facts material to the application of a rule of law are undisputed, the
application is a matter of law for the court since there is nothing to submit to the jury to resolve in
favor of one party or the other. In other words, when there is no dispute over the evidence
establishing the facts that control the application of a rule of law, summary judgment is an
appropriate means of deciding that issue. Byrd v. Hall, 847 S.W.2d 208, 214-15 (Tenn.1993).
It follows that the issues raised by the motion for summary judgment of whether the
plaintiff failed to present evidence supporting the essential elements of the cause of action, are
questions of law. Consequently, the scope of review is de novo with no presumption of correctness.
Rule 13 (d) T.R.A.P.; Union Carbide Corp. v. Huddleston, 854 S.W.2d 87, 91 (Tenn.1993). "No
presumption of correctness attaches to decisions granting [or denying] summary judgments because
they involve only questions of law. Thus, on appeal, we must make a fresh determination
concerning whether or not the requirements of Tenn. R. Civ. P. 56 have been met." Cowden v.
Sovran Bank/Central South, 816 S.W.2d 741, 744 (Tenn.1991).
I. Whether the trial court erred in granting Bank’s motion
for summary judgment in holding that Dunlap could not
contradict his deposition testimony by his affidavit;
II. Whether the trial court erred in granting Bank’s motion
for summary judgment while there was outstanding discovery;
and
III. Whether the trial court erred in granting Bank’s motion
for summary judgment while there were motions pending:
The Bank established that Dunlap executed the $350,000 note, and Dunlap even
admits such in his Answer to Amended Complaint. Dunlap was unable to produce any proof that
he had paid the note. As of March 11, 1994, Dunlap owed $100,000 on the principal, $2,994.44 in
accrued interest and additional interest accruing at $19.44 per day. We find no evidence in the
record suggesting that summary judgment on this issue was inappropriate and accordingly affirm
the trial court’s decision in this regard.
In addition to executing the notes, Dunlap also executed two personal guarantees to
secure the indebtedness of AHP. Dunlap admitted to executing the October 30, 1991, note for
$1,000,000 as President of AHP. He also admitted executing both the July 17, 1991, and October
30, 1991, guarantees of AHP’s debt.
The Bank established the validity of the obligations as well as Dunlap’s and AHP’s
default on the notes and guarantees. The note executed on October 30, 1991, was due in full on
October 30, 1992. The Bank held the note and had the right to sue to collect on it. See, e.g., Martin
v. Martin, 755 S.W.2d 793 (Tenn. App. 1988); Long v. Range, 213 S.W.2d 52, 54-55 (Tenn. App.
1948). Because the Bank also held Dunlap’s personal guarantees on AHP’s debt, it had a right to
sue Dunlap as well.
A guarantor in a commercial transaction shall be held to the full extent of his
obligation and the words of his guarantee are to be taken as strongly against the guarantor as sense
will admit. Farmers-Peoples Bank v. Clemmer, 519 S.W.2d 801, 804-805 (Tenn. 1975); First Am.
Nat’l Bank of Nashville v. Hall, 579 S.W.2d 864, 868 (Tenn. App. 1978). The guarantees at issue
here were continuing, absolute and unconditional with respect to AHP’s debt. The guarantees were
never terminated, and Dunlap is liable for both principal and interest due on AHP’s note. The
amount of the outstanding note was established by the unchallenged affidavit of Aubrey G. Oliver,
Senior Vice President and Manager of the Credit Department of Boatmen’s Bank, executed on
March 3, 1994. Therefore, the trial court properly entered summary judgment in favor of the Bank
and against Dunlap.
Dunlap raised as an issue on appeal the question of whether his third Affidavit of
September 13, 1994, created a genuine issue of material fact regarding the July 17, 1991, guarantee
so as to preclude entry of an order of summary judgment. In his amended answer to the complaint,
Dunlap admitted that he entered into a guarantor relationship with the Bank. Furthermore, Dunlap
admitted in his May 24, 1994, deposition that he recognized the July 17, 1991, guarantee and that
it bore his signature. Specifically, he stated:
Q. I’m going to pass to you now what has been marked as
Exhibit 15 to your deposition [the original July 17, 1991, Guarantee],
and I’m going to ask you if you recognize this document and if that
is your signature at the bottom?
A. Yes, I do recognize the document and it is my signature.
Dunlap asserts that he has created a genuine issue of material fact by statements
contained in his third Affidavit executed September 13, 1994. Examination of the affidavit in
question reveals that the testimony Dunlap contradicts is not that of May 24, 1994, but rather that
of April 26, 1996. The affidavit reads in relevant part:
6. Prior to now, I have not had the discovery necessary to
attempt to prove the purported July 17, 1991, guarantee is a
fraudulent document. In Volume 1 of my deposition when I first saw
the purported guarantee, I stated that I did not recognize it and,
although it looked like my signature, it appeared to be photocopied
onto the guarantee.
7. To date, I still have not seen an original of the purported July
17, 1991 guarantee.
It is clear that the cited sections of the third Affidavit refer to Dunlap’s first deposition taken on
April 26, 1994, and not to the May 24 deposition. When Dunlap was confronted with the original
July 17, 1991, guarantee, Dunlap stated without equivocation that the guarantee bore his signature.
The May 24 deposition referred to “Exhibit 15" which was the original July 17, 1991 guarantee. The
mere existence of Exhibit 15 contradicts Dunlap’s statement to the contrary, and this point is
supported by the affidavit of Sheryl Weatherford, the court reporter at the May 24 deposition, who
stated that Exhibit 15 was the original July 17, 1991, guarantee.
In light of the foregoing, we do not find that Dunlap’s affidavit testimony which
addressed a different deposition and which states facts that are fundamentally wrong can create a
genuine issue of material fact. The test for a "genuine issue" is whether a reasonable jury could
legitimately resolve that fact in favor of one side or the other. If the answer is yes, summary
judgment is not appropriate; if the answer is no, summary judgment is proper because a trial would
be pointless as there would be nothing for the jury to do and the judge need only apply the law to
resolve the case. In making this determination, the court is to view the evidence in a light favorable
to the nonmoving party and to allow all reasonable inferences in his favor. “Genuine issue" as used
in Rule 56.03 refers to disputed, material facts. It cannot be said that patently false statements create
genuine issues of material fact so as to preclude summary judgment. See, e.g., Byrd v. Hall, 847
S.W.2d 208, 215 (Tenn. 1993).
While it is true that Dunlap may explain or contradict prior testimony with an
affidavit, the effect is merely that the conflicting statements cancel out each other. Tibbals Flooring
Co. v. Stanfill, 410 S.W.2d 892, 896 (Tenn. 1967). Two sworn inconsistent statements by a party
are of no probative value in establishing a disputed issue of material fact. Price v. Becker, 812
S.W.2d 597, 598 (Tenn. App. 1991). We would then be forced to disregard the statements as a
matter of law. Ayers v. Rutherford Hosp., Inc., 689 S.W.2d 155, 162 (Tenn. App. 1984). Even if
the affidavit were to cancel out the prior admission, the undisputed admission contained in Dunlap’s
answer remains. Boatmen’s amended complaint stated:
7. Dunlap unconditionally guaranteed all indebtedness,
obligations and liabilities of Products [AHP] to Boatmen’s in a
guarantee attached here to as EXHIBIT D [July 17, 1991 Guarantee]
In response, Dunlap stated in his answer:
7. Dunlap would admit that he entered in a Guarantor agreement
with Boatmen’s Bank.
Moreover, summary judgment was proper because Dunlap identified and acknowledged his
signature on the October 30, 1991, guarantee, AHP’s $1,000,000 note and AHP’s line of credit
which he signed as Guarantor. Dunlap’s argument is without merit in light of the October 30, 1991,
guarantee.
Dunlap also asserts on appeal that summary judgment was inappropriate because the
trial court granted the motion while Dunlap’s “Notice of Request for Production of Documents and
Things” was outstanding. However, it appears to the Court that the Bank filed a response to the
discovery request on July 19, 1994, and made the documents available for inspection and copying.
Dunlap also asserts that the trial court erred in granting summary judgment because Dunlap’s motion
to compel had not been heard. However, there is no indication that Dunlap ever set the motion for
hearing and it appears that Dunlap made no attempt at discovery between September, 1994, and
January, 1996, when the trial court entered the order granting summary judgment.
Dunlap’s assertion that the discovery was outstanding is disingenuous in light of the
admission contained in his third Affidavit of September 13, 1994, that he had “been examining a
number of documents produced in discovery by the Plaintiff . . .” If the Bank did, in fact, fail to
comply with the discovery request, Dunlap should have followed the procedure mandated in such
circumstances by Rule 56.07 T.R.C.P. That rule states:
Should it appear from the affidavits of a party opposing the
motion that such party cannot for reasons stated present by affidavit
facts essential to justify the opposition, the court may refuse the
application for judgment or may order a continuance to permit
affidavits to be obtained or depositions to be taken or discovery to be
had or may make such other order as is just.
Rule 56.07 T.R.C.P. The record is devoid of any evidence that Dunlap ever filed an affidavit that
complied with the foregoing Rule stating the need for further discovery. Furthermore, Dunlap
requested and was granted an extension in which to respond to the motion for summary judgment
and did not file the affidavit during that time. Therefore, Dunlap should not be heard to now
complain. Dunlap also asserts that “[t]here is some doubt regarding the propriety of the court’s
granting a motion for summary judgment while various motions are pending.” The two outstanding
motions to which he refers are AHP’s “Motion to Set Aside Default Judgment” and Dunlap’s
“Motion to Amend Answer to File Compulsory Counterclaim.”
Appellant does not indicate how the outstanding motions might create a genuine issue
of material fact so as to preclude summary judgment. We find no requirement that all outstanding
motions be resolved in advance of summary judgment. Under Rule 56 T.R.C.P., once the Bank
established Dunlap’s liability, the burden shifted to Dunlap to establish that a genuine issue of
material fact existed. Dunlap failed to demonstrate such facts, and we find that this issue is without
merit.
IV. Whether the trial court erred in denying Dunlap’s motion
to amend answer to file compulsory counterclaims:
The Bank moved for summary judgment on June 22, 1994. After being postponed
twice at Dunlap’s insistence, the motion was heard on September 20, 1994. On February 24, 1995,
Dunlap filed a Motion to Amend Answer to File Compulsory Counterclaim. Rule 15.01 T.R.C.P.
provides that leave to amend pleadings is to be freely given. However, despite the liberality of our
Rules, the decision to permit amendment is within the sound discretion of the trial court, and such
decisions are rarely reversed on appeal unless there is an abuse of discretion. Wilson v. Ricciardi,
778 S.W.2d 450, 453 (Tenn. App. 1989). One relevant factor guiding the Court in this case is
Dunlap’s delay in filing the motion to amend answer. Merriman v. Smith, 599 S.W.2d 548, 559
(Tenn. App. 1979).
In Welch v. Thuan, 882 S.W.2d 792, 794 (Tenn.App. 1994), this Court addressed
a similar circumstance and found that it was not error for the trial court to deny a plaintiff’s motion
to amend the complaint where it appeared that the movant had filed the motion to amend within a
week after the motion for summary judgment had been filed. In this case, Dunlap waited seven
months after the motion for summary judgment had been filed and some five months after the
hearing on the motion before filing a motion to amend the complaint. In light of the foregoing, we
find that the trial court did not abuse its discretion in denying the motion to amend, and in granting
summary judgment to the Bank on the basis of the pleadings as they stood at the time the motion for
summary judgment was filed. Id. at 794. The decision of the trial court in this regard is affirmed.
V. Whether the trial court erred in denying AHP’s motion to
set aside the default judgment in order to allow it to file
compulsory counterclaims:
The Bank filed a motion for default judgment against AHP on March 11, 1994, which
the trial court granted on March 18, 1994. AHP did not file a notice of appeal from that judgment.
On October 31, 1994, AHP filed a Rule 60.02 T.R.C.P. motion to set aside judgment by default. The
trial court denied the motion by order entered December 12, 1994. AHP filed a second Rule 60.02
T.R.C.P. motion to set aside the default judgment on March 17, 1995, which the trial court denied
by “Order on Pending Motions” entered January 26, 1996. Thereafter, Dunlap and AHP filed the
notice of appeal on February 22, 1996.
Parties seeking relief from a judgment by means of a Tenn.R.Civ.P. 60.02 motion
have the burden of proving that they are entitled to relief. Hopkins v. Hopkins, 572 S.W.2d 639,
640 (Tenn.1978); Rhea v. Meadowview Elderly Apartments, Ltd., 676 S.W.2d 94, 95 (Tenn.
App.1984). This is also true for parties seeking relief from a default judgment in accordance with
Tenn.R.Civ.P. 55.02 and Tenn.R.Civ.P. 60.02. However, motions to set aside default judgments are
not viewed with the same strictness that motions to set aside judgments after a hearing on the merits
are viewed. Motions to set aside default judgments are construed liberally in favor of granting the
relief requested. Tenn. Dept. of Human Services v. Barbee, 689 S.W.2d 863, 867 (Tenn.1985).
Obtaining relief from a default judgment is generally accomplished in one of two
ways. Most commonly, the movant sets forth facts explaining why it is entitled to relief and
demonstrating that it has a meritorious defense to the underlying action. However, a default
judgment can also be set aside upon proof in accordance with Tenn.R.Civ.P. 60.02(3) that the
judgment itself is void. Patterson v. Rockwell Int’l, 665 S.W.2d 96, 100-101 (Tenn.1984); Hopkins
v. Hopkins, 572 S.W.2d 639, 640 (Tenn.1978).
An order denying a Tenn.R.Civ.P. 60.02 motion is a final order. Thus, an affected
party may, at its option, pursue a direct appeal or seek a re-examination of the order pursuant to
Tenn.R.Civ.P. 59. Inryco, Inc. v. Metropolitan Engineering Co., Inc., 708 F.2d 1225, 1232 (7th
Cir.), cert. denied, 464 U.S. 937, 104 S. Ct. 347 (1983); Daly Mirror, Inc. v. New York News, Inc.,
533 F.2d 53, 56 (2d Cir.), cert. denied, 429 U.S. 862, 97 S. Ct. 166 (1976). In this case, Appellants
did not appeal the trial court’s denial of the first motion to set aside order granting default judgment
entered December 12, 1994. Accordingly, it appears that the judgment is final, and the second
motion to set aside default judgment filed March 17, 1995, is barred by the doctrine of res judicata.
Lee v. Hall, 790 S.W.2d 293, 294 (Tenn. App. 1990); Stacks v. Saunders, 812 S.W.2d 587, 590
(Tenn. App. 1990).
AHP also moved to set aside the default judgment so that it could file a compulsory
counterclaim; however, the trial court denied the motion, holding that the proposed counter-claims
could not be filed after entry of judgment. In Ingram v. Phillips, 684 S.W.2d 954, 958 (Tenn. App.
1984), the trial court had entered a judgment in favor of plaintiff. After entry of judgment, defendant
sought to amend the judgment in order to assert a compulsory counterclaim, which the trial court
denied. On appeal, the Middle Section of this Court held that defendant’s attempts to assert a
compulsory counterclaim after the entry of the judgment came too late, and defendant was barred
from asserting the counterclaim. Likewise, we find that the issue is without merit.
VI. Whether the trial court erred in denying AHP’s motion to
set aside the default judgment when Bank’s motion for default
judgment had been filed prior to an answer being due:
Appellants argue that the default judgment is void because the motion for default
judgment was filed before a timely response by AHP was due and because the Bank failed to give
AHP the required notice of the motion for default judgment. The Bank filed its original complaint
in this cause on December 7, 1993. The Bank was unable to personally serve Dunlap, and on
January 7, 1994, the trial court entered an order of publication. On January 21, 1994, the Bank filed
its First Amended Verified Complaint. Service of process by publication was completed on
February 1, 1994, as evidenced by the notice of filing of proof of publication on February 7, 1994.
On February 15, 1994, the Bank personally served process upon AHP’s corporate secretary, Berlyn
Dunlap. The Bank subsequently discovered that Dunlap was residing in Florida. Thereafter, on
March 2, 1994, the Bank served Dunlap and AHP with the Bank’s motion for default judgment
based upon the service of process by publication completed February 1, 1994. On March 4, 1994,
the Bank sent Dunlap and AHP copies of the Affidavit of Aubrey G. Oliver.
On March 11, 1994, the Bank filed a motion for judgment by default based on the
February 15, 1994, personal service on AHP’s corporate secretary, Berlyn Dunlap. That motion
expressly stated that the motion would be heard on March 18, 1994, if no answer was filed. The
Bank then served notice upon Dunlap at both his last known Memphis address and at his Florida
address. On March 18, 1994, the trial court entered a default judgment against AHP.
Rule 12.01 T.R.C.P. expressly provides:
A defendant shall serve and file an answer within thirty (30) days
after the service of the summons and complaint upon him . . .
Therefore, AHP had 30 days after service in which to file an answer. AHP did not do so. The
original complaint was filed on December 7, 1993, and the First Amended Verified Complaint was
filed on January 21, 1994. In spite of the service by publication completed February 1, 1994, the
Bank personally served AHP through its corporate secretary on February 15, 1994. While it is
undisputed that the motion for default judgment was filed before the answer was due, we find no
prohibition to that practice. AHP did not file an answer within 30 days as required by the Rules.
The motion for default judgment was neither heard nor the order granted until March 18, 1994,
which was more than 30 days after the First Amended Verified Complaint had been filed.
Rule 55.01 T.R.C.P. contains no prohibition against the premature filing of a motion
for default judgment so long as the order on default judgment is not entered until after the time the
defendant has had to respond. AHP argues that the Bank did not give it proper notice of the hearing
on the motion for default judgment. The facts are uncontroverted that the Bank personally served
AHP’s corporate secretary with a copy of the First Amended Verified Complaint on February 15,
1994. Thereafter, the Bank on March 11, 1994, served both AHP and Dunlap with the motion for
default judgment and a notice of the hearing on motion for default judgment. AHP did not make an
appearance, timely file an answer, nor come forward with any explanation as to why it failed to plead
or otherwise defend this action. The Bank complied with all rules regarding obtaining a default
judgment, and the trial court properly granted the Bank’s motion for default judgment against AHP.
VII. Whether the trial court erred in denying Dunlap’s motion
to reconsider and for sanctions:
In its supplemental memorandum in support of summary judgment, the Bank cited
the case of Wilkerson v. Standard Knitting Mills, Inc., 1989 WL 120298 (Tenn. App. Oct. 11,
1989). In fact, the portion of the case relied upon by the Bank was this Court’s dissent, and the Bank
did not designate it as such. Dunlap subsequently filed a motion to reconsider ruling and for
sanctions on July 10, 1995. That motion was ultimately denied by the trial court on January 26,
1996. That same January 26, 1996, order granted the Bank’s motion for summary judgment.
It appears to the Court that the Bank’s counsel notified the trial court of the error on
July 10, 1995, during a hearing. Bank’s counsel stated:
I have an apology to make to the Court and a clarification. Mr. Smith
this morning brought to my attention that there was a miscitation on
my part of an unreported case. In a supplemental memorandum I
referred to an unreported case. . . . When I cited the Court, I did not
explain that I was citing, and I frankly didn’t see it. Mr. Smith just
brought it to my attention. In the case of Wilkerson Standard versus
Standard Knitting Mills what I cited to the Court was from the
dissenting opinion.
The trial court was aware of the mistake on July 10, 1995, and even addressed the
issue during the hearing. The trial court stated:
In the case I didn’t rely upon it [Wilkerson case] and I will look at it
and see, and if it is not a determining factor, there is not a lot to talk
about probably.
In addition to pointing out the mistake, Dunlap moved the trial court for Rule 11
T.R.C.P. sanctions against the Bank’s counsel including denying the motion for summary judgment,
dismissing the Bank’s counsel of record, and awarding Dunlap attorney’s fees and costs. The trial
court denied said relief. We do not find that the trial court erred in this regard.
It appears to the Court that the erroneous citation to legal authority was inadvertent
and unintentional. The trial court went so far as to state that it had not relied upon the Wilkerson
case, and the Bank cited in its memorandum to other reported authority that has not been challenged.
It further appears that the trial court was aware of the mistaken citation for over six months from July
10, 1995, until the entry of the order granting the motions for summary judgment on January 26,
1996. In light of the foregoing, the trial court did not err in denying Dunlap’s motion for
reconsideration and for sanctions, and we affirm the trial court’s decision denying the requested
relief.
VIII. Whether the trial court erred in finding Dunlap in contempt of court:
Dunlap has appealed the October 11, 1996, “Order on Contempt” which found him
to be in contempt of court for his failure to abide by the trial court’s April 6, 1994, injunction against
transferring and disposing of assets, for his failure to comply with the July 9, 1996, Order
Compelling Discovery and the July 16, 1996, Order to produce American Express records. The trial
court ordered Dunlap to produce all records related to ownership of both bank and investment
accounts and related transactions. The Order also required Dunlap to produce all American Express
records, bank records, income tax records and the like.
Dunlap asserts that under the rationale of Loy v. Loy, 222 S.W.2d 873 (Tenn. App.
1949), a party may be tried only once for contempt. He maintains that the trial court had
administered punishment previously and that he should not be punished again for the prior contempt
because the trial court had already administered punishment for the previous offenses.
During the course of the proceedings, the trial court ordered Dunlap to comply with
the discovery requests on several occasions. By order entered July 9, 1996, the trial court compelled
discovery pursuant to the Bank’s requests. Subsequently on July 16, 1997, an order was entered
directing Dunlap, in lieu of a contempt hearing, to produce his Morgan-Keegan account statements,
copy of the 1995 Jeep title and his American Express records. That same order instructed Dunlap
to appear for his deposition on the following day, July 18, 1996. Dunlap neither produced the
requested information nor appeared for his deposition. Dunlap made a partial production of
documents on July 29, 1996, but from the documents submitted, it was apparent that Dunlap had
violated the trial court’s April 9, 1994, order prohibiting disposition of his assets. Thereafter on
August 9, 1996, Bank filed a second motion for contempt.
The petitions for contempt came to be heard on October 9, 1996, and on October 11,
1996, the trial court entered an order finding Dunlap in civil contempt for violating the April 6, 1994,
injunction, the July 9, 1996, order compelling discovery, and the July 16, 1996, order to produce
financial records. That same order also directed Dunlap to produce numerous records no later than
November 11, 1996. Evidently, Dunlap never complied with the trial court’s order by producing the
documents.
There has been no showing that Dunlap ever complied with the trial court’s directives
or that he otherwise complied with the discovery requests. Therefore, Dunlap has not purged himself
of contempt, and we find that Dunlap has only been “punished” for contempt once by entry of the
October 11, 1994, “Order on Contempt.”
Civil contempt is intended to benefit the litigant by compelling compliance with the
trial court’s orders. Parties in contempt may purge themselves by compliance. There is a maxim
in the law that
He who seeks Equity must do Equity, and he who has done
inequity shall not have Equity.” Therefore, it is a general rule that a
party who is in contempt will not be heard by the Court, when he
wishes to make a motion or ask a favor; . . . . His first duty is to
purge his contempt, and the only steps he can take are to apply to the
Court (1) to set aside the proceedings against him because they are
irregular, and (2) to be discharged on the ground that he has purged
himself of his contempt, by doing the act for the non-performance of
which the contempt was incurred, and confessing judgment for the
costs occasioned by his contumacy.
Segelke v. Segelke, 584 S.W.2d 211, 214 (Tenn.App. 1978) (quoting Gibson’s Suits in Chancery,
5th ed., Vol. 2, § 970, p. 195).
In this case, Dunlap has not purged himself of contempt. However, rather than refuse
to hear the appeal, in the interest of judicial economy, we will hear and dispose of the appeal. In so
doing, we find that Dunlap was punished once for contempt by order entered October 11, 1996, and
that he has not purged himself of said contempt. Accordingly, we find that Dunlap has no basis to
complain.
IX. Whether the trial court erred in ordering the Chancery
Court Clerk’s Office to release to Bank funds on deposit:
On October 8, 1996, Dunlap and AHP filed a motion, inter alia, to stay the
proceedings to enforce the judgment. The trial court denied said request by order entered October
29, 1996, and released to the Bank funds paid into the trial court by Dunlap and/or AHP. That order
resulted in a disbursement to the Bank in excess of $28,000. Appellants subsequently petitioned this
Court for relief which we denied by Order entered December 6, 1996. Dunlap asserts that it was
error for the trial court to release the funds while the appeal was pending. In light of the fact that we
have found, as did the trial court, that Dunlap and AHP are liable for the judgment, we conclude that
it was not error for the trial court to release said funds before conclusion of the appeal.
For the foregoing, reasons, we conclude that the judgment of the trial court should
be and is affirmed in all respects.
____________________________________
FARMER, J.
______________________________
CRAWFORD, P.J., W.S. (Concurs)
______________________________
INMAN, Sp. J. (Concurs)