Attorneys For Appellants Attorneys For Appellees
Charles L. Berger R. Thomas Bodkin
Jennifer Ulrich Pamela J. Hensler
Berger and Berger Bamberger, Foreman,
Oswald & Hahn
Evansville, Indiana Evansville, Indiana
Robert R. Faulkner
Evansville, Indiana
____________________________________________________________________________
__
In the
Indiana Supreme Court
_________________________________
No. 82S05-0305-CV-185
Pat Coslett and Kim Coslett, L.B. Jones Furniture, Inc.,
d/b/a Pat Coslett's Furniture, Inc.
Appellants (Plaintiffs below),
County of Vanderburgh,
Cross-Claimants-
Appellants,
v.
Weddle Brothers Construction Company, Inc.,
Appellees (Defendants below).
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Appeal from the Vanderburgh Superior Court, No. 82C01-0106-CT-352
The Honorable Robert Tornatta, Judge
_________________________________
On Petition To Transfer from the Indiana Court of Appeals, No. 82A05-0209-
CV-430
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November 20, 2003
DICKSON, Justice.
This appeal challenges the trial court's ruling setting aside default
judgments for excusable neglect. Consistent with this Court's deferential
standard of review of trial court discretion in these matters, we affirm.
Plaintiffs-appellants Pat Coslett, Kim Coslett and L.B. Jones
Furniture, Inc. d/b/a Pat Coslett's Furniture Festival, Inc. ("Coslett's
Furniture") initiated this action on June 12, 2001 against Weddle Brothers
Construction Company, Inc. ("Weddle Brothers"), Vanderburgh County, and
others[1] for negligent delay in the construction of a bridge. Two days
after suit was filed, Coslett's Furniture effected service on Weddle
Brothers by certified mail at its corporate headquarters in Bloomington,
Indiana. When the complaint was received, Weddle Brothers sent a copy of
the complaint and summons to its insurance agent, Tobias Insurance Agency,
through which it had obtained a commercial general liability policy with
Zurich North American Insurance. Vanderburgh County filed its answer and
cross-claim against Weddle Brothers on September 4, 2001, obtaining service
by certified mail. However, Weddle Brothers did not timely file any
answers or other responsive pleadings with the trial court. Default
judgments were entered against Weddle Brothers on July 13, 2001 as to the
plaintiffs' complaint, and on October 11, 2001 as to Vanderburgh County's
cross-claim.
On November 30, 2001, a claims manager for Zurich North American
Insurance wrote to Weddle Brothers, advising it that Coslett's Furniture's
claims were not covered under the Weddle Brothers policy. When Weddle
Brothers received that letter in mid-December, it immediately sought and
retained counsel, and on February 6, 2002, moved to set aside the default
judgments on the grounds of improper service and excusable neglect.
Following extensive further briefing and argument, the trial court set
aside the default judgments. The Court of Appeals reversed in a memorandum
decision. 783 N.E.2d 806 (Ind. Ct. App. 2003) (table). We granted
transfer.
Once entered, a default judgment may be set aside because of mistake,
surprise, or excusable neglect[2] so long as the motion to set aside the
default is entered not more than one year after the judgment and the moving
party also alleges a meritorious claim or defense. Ind. Trial Rule 55(C);
60(B). When deciding whether or not a default judgment may be set aside
because of excusable neglect, the trial court must consider the unique
factual background of each case because "no fixed rules or standards have
been established as the circumstances of no two cases are alike." Siebert
Oxidermo, Inc. v. Shields, 446 N.E.2d 332, 340 (Ind. 1983); quoting Grecco
v. Campbell, 386 N.E.2d 960, 961 (Ind. Ct. App. 1979); see also Boles v.
Weidner, 449 N.E.2d 288, 290 (Ind. 1983). Though the trial court should do
what is "just" in light of the facts of individual cases, that discretion
should be exercised in light of the disfavor in which default judgments are
held. Allstate Ins. Co. v. Watson, 747 N.E.2d 545, 547 (Ind. 2001). A
ruling denying or granting relief on a motion to set aside a default is
deemed a final judgment from which an appeal may be taken. T.R. 60(C). On
appeal, a trial court's decision to set aside a default judgment is
entitled to deference and is reviewed for abuse of discretion. Watson,
747 N.E.2d at 547; Smith v. Johnston, 711 N.E.2d 1259, 1262 (Ind. 1999).
Any doubt of the propriety of a default judgment should be resolved in
favor of the defaulted party. Watson, 747 N.E.2d at 547; Green v. Karol,
168 Ind. App. 467, 475, 344 N.E.2d 106, 111 (1976). Indiana law strongly
prefers disposition of cases on their merits. State v. Van Keppel, 583
N.E.2d 161, 162 (Ind. Ct. App. 1991). A trial court will not be found to
have abused its discretion "so long as there exists even slight evidence of
excusable neglect." Security Bank & Trust Co. v. Citizens Nat. Bank, 533
N.E.2d 1245, 1247 (Ind. Ct. App. 1989).
In several cases we have confronted the propriety of setting aside
default judgments when a defendant's insurer or insurance agent is notified
but counsel fails to timely appear and answer. In Boles v. Weidner, 449
N.E.2d 288 (Ind. 1983), this Court affirmed a trial court's decision to set
aside a default judgment, finding excusable neglect where the defendant
passed the summons and complaint on to his independent insurance agent, to
be forwarded on to the insurer. However, because of a "breakdown in
communication," the insurer never received notice of the suit. Id. at 290.
We held that "since [the defendant] did not hear from anyone, and had
taken the steps expected of him, it certainly is reasonable for the trial
court to find there was excusable neglect justifying setting aside the
default judgment." Id. at 291.
In Seibert Oxidermo, Inc. v. Shields, 446 N.E.2d 332 (Ind. 1983), the
trial court refused to set aside a default judgment where the defendant had
forwarded the "suit papers" to its insurance agent, who failed to get them
to the proper insurance carrier on time. 446 N.E.2d at 334. We affirmed,
observing that the trial court could have based a finding of excusable
neglect or mistake upon the apparent misunderstanding between the defendant
and its insurance agent but chose not to do so, and noting, "[m]ore
significantly, under the evidence it was not compelled to do so." Id. at
340.
In Whittaker v. Dail, 584 N.E.2d 1084 (Ind. 1992), the trial court
refused to set aside a default judgment. The defendant had personally
retained counsel that represented him during the three years the case was
pending, but his lawyers were permitted to withdraw two months before trial
because Whittaker had not paid their fees. Upon receiving notice of a pre-
trial conference, he called his insurance company which, on his behalf,
contacted a law firm, but the firm believed that it had been hired not to
defend the defendant, but to file a declaratory judgment against him. Id.
at 1086-87. Noting that the case had been pending for three years and that
there was no evidence of the plaintiff's lack of diligence other than his
inability to continue to pay his attorneys, we reversed the trial court and
set aside the default judgment.
In Smith v. Johnston, 711 N.E.2d 1259 (Ind. 1999), the trial court
declined to set aside a default judgment entered against a defendant who
had failed to inform his counsel that he had been sued. Although finding
the default judgment should be set aside on other grounds,[3] we stated:
"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." Id. at 1262.
Coslett Furniture and Vanderburgh County argue that Boles and
Whittaker are distinguishable because in those cases, had the communication
"breakdown" not occurred, the insurance companies would have come to the
defense of their insureds. They point out that here, the insurer made no
representations that it intended to defend the suit on Weddle Brothers'
behalf, and the Company instead unreasonably assumed, without any specific
evidence, that the insurer would retain counsel for its defense. Instead,
the Appellants urge us to consider Smith and Seibert Oxidermo, which found
no error in the refusal to set aside default judgments under facts similar
to the present case.
Significantly, in three of these four cases, Boles, Seibert Oxidermo,
and Smith, we deferred to the decision of the trial court in ruling upon a
motion to set aside a default. And in the fourth, Whittaker, we found that
the record "unequivocally reveals" facts that compelled us to find an abuse
of discretion. 584 N.E.2d at 1087.
To resolve this appeal, the overriding issue is whether the
circumstances of this case require us to conclude that the trial court
abused its discretion in setting aside its prior default judgments. In
accord with our disfavor of default judgments, our preference for
disposition of cases on their merits, and our deference to trial court
decisions in ruling upon motions to set aside default judgments, the
controlling question is not whether there has been a "breakdown in
communication" but whether there is "even slight evidence of excusable
neglect." Security Bank & Trust Co., 533 N.E.2d at 1247.
Here the trial court noted both the important role of default
judgments in the efficient administration of justice and the judicial
preference for deciding disputes on their merits. It stated: "One can
easily argue that Weddle Brothers did respond to this lawsuit in a
reasonable manner. It argues that it handled the complaints the way it
always does, by notifying its insurance company." Appellant's Appendix at
174. The trial court observed that the case "concerns substantial amounts
of money and weighty policy determinations," id. at 176, and considered
whether "a client should have to look over its representative's shoulder to
make sure it is being defended." Id. The trial court concluded,
"considering all the facts and circumstances involved, the Court finds
Weddle Brothers has shown excusable neglect and that it has a meritorious
defense to both the plaintiffs' and the County's claims against it." Id.
We conclude that the ruling of the trial court is supported by evidence of
excusable neglect, is entitled to deference, and was not an abuse of
discretion.
We affirm the decision of the trial court to set aside the default
judgments.
Shepard, C.J., and Sullivan and Boehm, J., concur. Rucker, J., dissents
without separate opinion.
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[1] The complaint also named as defendants the State of Indiana, the
Indiana Department of Transportation, and Bernardin Lochmueller &
Associates, Inc. Each of these defendants, however, timely filed an
answer. The trial court entered default judgment only against defendant
Weddle Brothers.
[2] Other bases for setting aside a default judgment are found in T.R.
60(B), but are inapplicable here.
[3] Because plaintiff's counsel failed to provide notice of the filing
of the complaint to known counsel for the defendant, we concluded that the
default judgment was obtained by actions prejudicial to the administration
of justice warranting relief under Indiana Trial Rule 60(B)(3). Id. at
1264.