Southside Automotive of Anderson, Inc., and David Amadio v. Celeste Smith and Byron Swain

FILED
Dec 07 2018, 8:28 am

CLERK
Indiana Supreme Court
Court of Appeals
and Tax Court

ATTORNEY FOR APPELLANTS ATTORNEY FOR APPELLEES
Ralph E. Sipes Paul J. Podlejski
Anderson, Indiana Anderson, Indiana

IN THE
COURT OF APPEALS OF INDIANA

Southside Automotive of December 7, 2018
Anderson, Inc., and Court of Appeals Case No.
David Amadio, 18A-SC-471
Appellants-Defendants, Appeal from the Madison Circuit
Court
v. The Honorable Thomas L. Clem,
Judge
Celeste Smith and Byron Swain, Trial Court Cause No.
Appellees-Plaintiffs 48C05-1709-SC-3029

Baker, Judge.

Court of Appeals of Indiana | Opinion 18A-SC-471 | December 7, 2018 Page 1 of 9
[1] Southside Automotive of Anderson, Inc. (Southside), and David Amadio

appeal the trial court’s denial of their motion to set aside a default judgment for

Celeste Smith and Byron Swain. Finding that the default judgment should have

been set aside, we reverse and remand for further proceedings. 1

Facts
[2] In late May 2017, Smith and Swain went to Southside to look for a car. They

became very interested in a 2007 BMW 530xi. The two spoke with Amadio, the

president of the company, about the car’s condition. Amadio claimed that “the

car was in mint condition . . . a rare find . . . [and] it appeared to be in good

shape.” Tr. Vol. II p. 11. Relying upon Amadio’s advice, on June 2, 2017,

Smith and Swain purchased the BMW “as-is” for $7,490 with all fees included.

Smith and Swain agreed to pay $4,000 immediately as a down payment and to

return on June 5, 2017, to pay an additional $2,500. Thereafter, they would pay

the remaining $990 in two monthly installments of $495.

[3] One day later, immediately after picking up the BMW, Smith and Swain started

having problems with it. The car started “knocking” and “backfiring” quite

loudly, id. at 13, so Smith called Amadio to inform him about the issues.

Amadio assured Smith that he had an excellent mechanic who would fix any

1
Because of our disposition, we are not analyzing the amount awarded or the appropriateness of allowing
the car to remain with Smith and Swain.

Court of Appeals of Indiana | Opinion 18A-SC-471 | December 7, 2018 Page 2 of 9
 minor problems the car might have. The two dropped the car off at Southside to

have it fixed.

[4] Smith and Swain did not hear from Amadio for another three weeks before they

called him again. Amadio said the repairs were not complete and that he would

need more time. Finally, after nearly three months, on August 28, 2017, Smith

and Swain picked up the car. The next day, the two experienced even more

problems. The BMW “almost caught fire,” “it began smoking,” and “the

[check] engine light came on.” Id. at 17. On September 1, 2017, Smith and

Swain took the car to Resf Motors, a BMW certified service center, to get a

proper diagnosis. Resf Motors informed the couple that the necessary repairs

would cost $1,927. Amadio refused to cover those costs.

[5] On September 13, 2017, Smith and Swain filed a small claims suit against

Southside and Amadio, arguing that they sold a car they falsely claimed to be in

“mint condition,” appellants’ app. vol. II p. 22; that it took Southside and

Amadio almost three months to make repairs; that Smith and Swain were

without a vehicle for that entire time; and that even after making repairs, the car

continued to malfunction. Smith and Swain sought $6,700 in damages and

$107 in court costs. A hearing was set for September 29, 2017.

[6] After receiving notice of this suit, on September 20, 2017, Amadio went to the

Madison Circuit Court and asked the court reporter if he or Southside needed

legal counsel for the September 29, 2017, hearing. She said, “You don’t have to

worry about that. He doesn’t operate that way. If you need an attorney, he will

Court of Appeals of Indiana | Opinion 18A-SC-471 | December 7, 2018 Page 3 of 9
 tell you.” Id. at 16. The fact that the court reporter made this statement is not

challenged, and the trial court made no finding to the contrary. The next day,

Southside and Amadio filed a counterclaim, denying Smith and Swain’s small

claims allegations and arguing that the two had failed to pay the remaining

purchase price ($3,490) or to return the BMW to Southside.2

[7] At the September 29, 2017, hearing, Smith and Swain appeared pro se and

Amadio appeared pro se and on behalf of Southside. Though Amadio is the

president of Southside, Southside technically failed to appear at the hearing

because it was not represented by an attorney. So, while Amadio appeared and

spoke for himself, he was not permitted to appear and speak on behalf of

Southside. The trial court admonished Amadio, who is not an attorney, for

attempting to represent Southside without a law license:

Okay. Do you know that it’s illegal for you to be here today in this
capacity?

***

You can’t represent yourself in this type of case okay, because it’s
against the corporation. . . . So, let’s try to do this and let’s let
plaintiffs talk about their case for a minute and see if we can get
somewhere[.]

Tr. Vol. II p. 5-6.

2
At this point, Smith and Swain had only paid the initial $4,000 down payment.

Court of Appeals of Indiana | Opinion 18A-SC-471 | December 7, 2018 Page 4 of 9
[8] Amadio explained what the court reporter had told him about not needing legal

counsel for a small claims proceeding:

[W]hen I tried to reach you to find out about procedural . . .
aspects and I explained to [the court reporter] what my question
concerning whether [sic] had to have an attorney, she said that . . .
the whole goal was to keep costs down that that . . . if I need . . . to
have one, you would let me know.

Id.

[9] Smith and Swain spoke at length about the incident without interruption or

pause. Amadio only spoke for a short amount of time and could not refute any

of Smith or Swain’s statements made against him. The trial court allowed

Amadio to speak only on his own behalf, drastically limiting what he could do.

Specifically, Amadio was not allowed to admit evidence or cross-examine

Smith and Swain, and the trial court restricted what Amadio could say.

Specifically, the court said, at different moments, as follows:

• “[Y]ou wouldn’t be able to do that.”
• “That’s—that’s out of bounds.”
• “Hang on, stop right there.”

Id. at 31-33.

[10] Ultimately, Amadio asked if the hearing could be delayed so Southside could

obtain proper legal representation, but the trial court stated that it would be

unnecessary and too expensive to “correct the matter.” Id. at 43. After the

informal hearing, the trial court entered a default judgment against both

Southside and Amadio in favor of Smith and Swain, awarding them $6,000, the

Court of Appeals of Indiana | Opinion 18A-SC-471 | December 7, 2018 Page 5 of 9
 maximum amount permissible under small claims jurisdiction.3 Appellant’s

App. Vol. II p. 7. The trial court did not order Smith and Swain to return the

BMW to Southside.4

[11] On October 27, 2017, Southside and Amadio filed a motion to correct errors

and to set aside the September 29, 2017, entry of default judgment, which the

trial court denied on January 24, 2018. Southside and Amadio now appeal.

Discussion and Decision
[12] Southside and Amadio’s core argument is that the trial court erred for three

reasons, one of which we find dispositive: the default judgment should have

been set aside because it was based on Amadio’s mistake.

[13] We will reverse a denial of a motion to set aside a default judgment only when

the trial court’s judgment was clearly against the logic and effect of the facts and

inferences supporting the judgment for relief. Whelchel v. Cmty. Hosps., 629

N.E.2d 900, 902 (Ind. Ct. App. 1994). On appeal, we give the trial court

substantial deference regarding its initial decision to enter a default judgment.

Bennett v. Andry, 647 N.E.2d 28, 31 (Ind. Ct. App. 1995).

3
See Ind. Code § 33-29-2-4(b)(1).
4
Though we are not analyzing the amount the trial court awarded Smith and Swain, we question the fairness
of this apparent double recovery. The two received the maximum amount permissible under small claims
jurisdiction and were able to keep the car without having to make the final payments.

Court of Appeals of Indiana | Opinion 18A-SC-471 | December 7, 2018 Page 6 of 9
[14] Default judgments are appropriate only when a party has not appeared in

person or by counsel. Smith v. Johnston, 711 N.E.2d 1259, 1264 (Ind. 1999).

Therefore, the default judgment against Amadio was erroneous because he

actually did appear at the hearing. To the extent the trial court entered a default

judgment against Amadio, it is reversible error. And even if the trial court

instead intended to rule against Amadio on the merits, that would also be

erroneous because Amadio was not afforded a full opportunity to present his

case at the hearing. Therefore, we reverse the judgment against Amadio and

remand for a new hearing.

[15] With respect to Southside, it is undisputed that while Amadio could represent

himself in the informal proceeding, he could not represent Southside, a separate

entity, because he was not an attorney. Ind. Small Claims Rule 8(c)(3). Amadio

argues that he relied to his detriment on the words of the court reporter, who

opined that the trial court judge probably would not require Southside to have

an attorney. Amadio alleges that this caused his mistaken belief that he could

represent both himself and Southside.

[16] A default judgment may be set aside under Indiana Trial Rule 60(B)(1) for

mistake, surprise, or excusable neglect. Johnston, 711 N.E.2d at 1264. Although

there is no fixed rule or standard for determining what constitutes a mistake,

State v. Mooney, 51 N.E.3d 281, 284 (Ind. Ct. App. 2016), as a general rule, our

courts favor deciding cases on the merits in the face of procedural errors that

mistakenly cause attorneys to miss deadlines or lose contact. Dalton Corp. v.

Myers, 65 N.E.3d 1142, 1146 (Ind. Ct. App. 2016). The burden is on the movant

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 to establish grounds for Trial Rule 60(B) relief for mistake, surprise, or

excusable neglect by affidavit or other evidence. JK Harris & Co., LLC v. Sandlin,

942 N.E.2d 875, 881 (Ind. Ct. App. 2011).

[17] While it is clear that Southside should have had an attorney, its failure to retain

one stemmed from Amadio’s reliance on the court reporter’s statement. In our

view, Amadio reasonably relied on the information provided by the court

reporter and appeared at the hearing, with a mistaken but understandable belief

that he could speak on behalf of himself and the company he heads.

[18] When the trial court realized what had happened, it should have continued the

hearing so that Southside could retain counsel. Instead, it refused to do so and

dramatically restricted what Amadio could and could not say during the

hearing, thereby affecting the rights of both Southside and Amadio. Under

these circumstances, the trial court erred by denying Southside’s motion to set

aside the default judgment based on mistake.

[19] In sum, a default judgment should not have been granted against Amadio

because he was present. A judgment on the merits could also not have been

entered against him because he was not permitted to fully defend himself or

prove his counterclaim. As for Southside, the better practice would have been a

continuance rather than a default. But having entered the default judgment, the

trial court should have later set it aside based on mistake. Both Amadio and

Southside are entitled to a new hearing.

Court of Appeals of Indiana | Opinion 18A-SC-471 | December 7, 2018 Page 8 of 9
[20] The judgment of the trial court is reversed and remanded for further

proceedings.

May, J., and Robb, J., concur.

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