ABA 241 PEACHTREE v. BROOKEN & McGLOTHEN

• Citation: 690 S.E.2d 514
• Decision Date: 03 February 2010
• Docket Number: No. A09A2341.,A09A2341.
• Court: United States Court of Appeals (Georgia)
• Parties: ABA 241 PEACHTREE, LLC v. BROOKEN & McGLOTHEN, LLC et al.

690 S.E.2d 514

ABA 241 PEACHTREE, LLC v. BROOKEN & McGLOTHEN, LLC et al.

No. A09A2341.

Court of Appeals of Georgia.

February 3, 2010.

Manchel, Wiggins & Kaye, Scott M. Kaye, Atlanta, for appellant.

John A. Moore, Atlanta, for appellees.

BERNES, Judge.

Appellant ABA 241 Peachtree, LLC sued appellees Eric McGlothen and Brooken & McGlothen, LLC ("B & M") to recover past due rent arising from an alleged breach of a commercial lease agreement. McGlothen filed his answer to the complaint one day late, automatically placing the case in default. After the time period in which McGlothen could have opened the default as a matter of right elapsed, Peachtree moved for a default judgment. In a series of orders, the trial court denied Peachtree's motion for default judgment, allowed McGlothen to open the default and to withdraw certain admissions that had been deemed admitted by virtue of McGlothen's failure to respond to discovery, and awarded McGlothen summary judgment. Peachtree argues that the trial court's rulings were erroneous. For the reasons that follow, we affirm in part and reverse in part.

The record shows that Peachtree filed suit against McGlothen and B & M, alleging breach of a commercial lease agreement. McGlothen was served with the summons and complaint on May 21, 2007. McGlothen, who was acting pro se, miscalculated the response due date and filed an answer on June 21-31 days after the date of service, thereby placing the case in automatic default pursuant to OCGA § 9-11-55(a).

On August 28, 2007, Peachtree moved the trial court for entry of a default judgment and also served McGlothen with several discovery requests, amongst them a request for admissions. McGlothen responded to Peachtree's motion for default judgment, mistakenly asserting that his answer had been timely filed. He also filed a motion to dismiss the complaint, arguing that Peachtree had failed to state a claim against him because he was not a party to the lease, had not signed the lease on behalf of B & M, and had not personally guaranteed the lease. McGlothen also argued that there was no allegation or evidence authorizing a piercing of B & M's corporate veil so as to subject McGlothen to personal liability.

McGlothen paid costs and the trial court initially held that McGlothen had opened the default as a matter of right, pursuant to OCGA § 9-11-55(a).¹ The trial court also entered an order converting McGlothen's motion to dismiss into a motion for summary judgment and directed that responses be filed within 30 days of the order.

Peachtree then filed a motion for reconsideration of the order opening the default as a matter of right. It also filed a brief in opposition to McGlothen's motion for summary judgment in which it contended that McGlothen had admitted his liability when he failed to respond to Peachtree's request for admissions, specifically the request asserting McGlothen's joint and several liability for the unpaid rent. Peachtree further contended that it was prepared to amend its complaint to add allegations related to the piercing of B & M's corporate veil in order to establish McGlothen's personal liability, but that McGlothen's failure to answer its other discovery requests prevented it from ascertaining the information necessary to ensure that allegations were made in good faith.

McGlothen responded to Peachtree's motion for reconsideration of the order opening the default by conceding that he had not been entitled to open the default as a matter of right pursuant to OCGA § 9-11-55(a), but nevertheless asserting that he was entitled to open the default pursuant to OCGA § 9-11-55(b). He also filed a motion to withdraw admissions supported by a sworn affidavit. In the affidavit, McGlothen averred that he was not a party to the lease at issue; that he had not personally guaranteed any of the obligations under the lease; that B & M was a Georgia corporation duly organized under the laws of Georgia; that B & M operated entirely separate from himself; and that B & M was not used to evade statutory or contractual responsibility, was not inadequately capitalized, did not fail to adhere to corporate formalities, and did not abuse the corporate entity.

The trial court issued a series of orders disposing of the outstanding motions. The trial court held that McGlothen was entitled to open the default pursuant to OCGA § 9-11-55(b) based upon its conclusion that this action presented "a proper case" for opening default, that McGlothen had filed his answer and announced ready to proceed to trial, and that McGlothen's affidavit set out a meritorious defense under oath. The trial court granted McGlothen's motion to withdraw the admissions, finding that the admissions were "incredible on their face and could be refuted by admissible evidence." And finally, the trial court granted summary judgment to McGlothen, holding that the clear and unambiguous terms of the lease agreement established that he was not, as a matter of law, personally obligated for any amounts due under the lease. It is from these orders that Peachtree appeals.

1. Peachtree contends that the trial court erred in permitting McGlothen to open the default pursuant to OCGA § 9-11-55(b).² It argues that it was entitled to a default judgment as a matter of right pursuant to OCGA § 9-11-55(a) because McGlothen had not yet paid costs at the time that Peachtree filed its original motion for default judgment.

But, contrary to Peachtree's position, OCGA § 9-11-55(b) authorizes a trial court, in its discretion, to open a prejudgment default at any time before final judgment on one of three grounds, so long as four conditions are met. The three grounds are providential cause, excusable neglect, and proper case. OCGA § 9-11-55(b). See Patterson v. Bristol Timber Co., 286 Ga.App. 423, 426(2), 649 S.E.2d 795 (2007). The four required conditions are (a) a showing made under oath; (b) an offer to plead instanter; (c) an announcement of ready to proceed to trial; and (d) the setting up of a meritorious defense. OCGA § 9-11-55(b); Patterson, 286 Ga.App. at 426(2), 649 S.E.2d 795.

Here, the trial court specifically noted that it was allowing the default to be opened on the ground that a proper case had been made, a ground which entitled the trial court to consider "all the facts." OCGA § 9-11-55(b). "The `proper case' ground ... has been construed to confer discretion on the trial court broader than that conferred on the other two grounds, as if reaching out to take in every conceivable case where injustice might result if the default were not opened." (Citation and punctuation omitted.) Legacy Hills Residential Assn. v. Colonial Bank, 255 Ga.App. 144, 145, 564 S.E.2d 550 (2002). See Axelroad v. Preston, 232 Ga. 836, 837(1), 209 S.E.2d 178 (1974); Colonial Penn Life Ins. Co. v. Market Planners Ins. Agency, 209 Ga.App. 562, 563, 434 S.E.2d 124 (1993). "The sole function of an appellate court reviewing a trial court's grant of a motion to open default is to determine whether all the conditions set forth in OCGA § 9-11-55 have been met and, if so, whether the trial court abused its discretion based on the facts peculiar to each case." Gilliam v. Love, 275 Ga.App. 687, 621 S.E.2d 805 (2005). See Patterson, 286 Ga.App. at 426-427(2), 649 S.E.2d 795.

The record in the case sub judice supports the trial court's conclusion that each of the four conditions precedent had been met. McGlothen had filed an answer, had announced ready to proceed to trial, and had filed a sworn affidavit setting forth a meritorious defense. Moreover, we cannot say that here, where the default is the result, not of failing to file an answer, but of a one-day miscalculation of the due date, that the trial court abused its discretion in concluding that this was a proper case in which to allow McGlothen to open the default. See Gilliam, 275 Ga.App. at 688-689, 621 S.E.2d 805; Henderson v. Quadramed Corp., 260 Ga.App. 680, 682(2), 580 S.E.2d 542 (2003); Albee v. Krasnoff, 255 Ga.App. 738, 740-741(1), 566 S.E.2d 455 (2002); Legacy Hills Residential Assn., 255 Ga.App. at 145-146, 564 S.E.2d 550.

2. Peachtree further argues that the trial court abused its discretion in granting McGlothen's motion to withdraw admissions.

Pursuant to OCGA § 9-11-36(b), the trial court may permit withdrawal ... of the admissions when the presentation of the merits of the action will be subserved thereby and the party who obtained the admission fails to satisfy the court that withdrawal ... will prejudice him in maintaining his action or defense on the merits. The trial court's ruling on this issue may be reversed only upon an abuse of discretion.

(Punctuation and footnote omitted.) Brown v. Morton, 274 Ga.App. 208, 209-210, 617 S.E.2d 198 (2005). See OCGA § 9-11-36(b); Cielock v. Munn, 244 Ga. 810, 811, 262 S.E.2d 114 (1979). In considering this issue, we note that "the ultimate purpose of litigation is to see the controversies are decided on their merits, and that the purpose of the rules of law is to promote justice rather than reward technical proficiency." (Citation and punctuation omitted.) Moore Ventures Ltd. Partnership v. Stack, 153 Ga.App. 215, 218, 264 S.E.2d 725 (1980).

The original burden of showing that the presentation of the merits of the action would be subserved by allowing him to withdraw the admissions...