Allstate Ins. Co. v. Green

• Decision Date: 21 June 2001
• Docket Number: No. 1999-CA-01795-SCT.,1999-CA-01795-SCT.
• Citation: 794 So.2d 170
• Parties: ALLSTATE INSURANCE COMPANY v. Jerry GREEN.
• Court: Mississippi Supreme Court

794 So.2d 170

ALLSTATE INSURANCE COMPANY v. Jerry GREEN.

No. 1999-CA-01795-SCT.

Supreme Court of Mississippi.

June 21, 2001.

Rehearing Denied August 23, 2001.

Lanny R. Pace, Jackson, for Appellant.

Duncan L. Lott, Booneville, for Appellee.

Before BANKS, P.J., SMITH and COBB, JJ.

COBB, Justice, for the Court:

¶ 1. Jerry Green filed suit in Tishomingo County, Mississippi on August 4, 1998, seeking judgment against Allstate Insurance Company for repair labor done and materials furnished in 1993 by Green's repair shop in the State of New York on a 1992 BMW automobile owned by Allstate. Green's complaint also sought payment for storage fees accruing from 1993-1998 in New York and in Mississippi. Green obtained service of process on Allstate through the CT Corporation, Allstate's registered agent in Mississippi.

¶ 2. Allstate filed no response, and on October 19, 1998, Green filed his application for Entry of Default, against Allstate with the Tishomingo County Circuit Clerk. The clerk entered the default. Allstate promptly responded with a Motion to Set Aside Entry of Default and on December 11, 1998, the motion was heard by the circuit court judge who denied Allstate's motion, held that the Entry of Default should remain in effect, and granted Allstate leave to conduct discovery on the issue of damages. After completion of routine discovery, a hearing was conducted on June 4, 1999, with testimony from Green and arguments of counsel, following which the circuit judge found that Green was entitled to $8,130.80 for repair work and hauling charges but not to any storage charges. Judgment was entered accordingly. Allstate timely filed a Motion for Amendment of Findings and Judgment or in the Alternative for a New Trial, which was denied by the circuit judge after hearing arguments of counsel.

¶ 3. Aggrieved, Allstate appeals, raising the following issues:

I. WHETHER THE TRIAL COURT ERRED IN NOT SETTING ASIDE THE ENTRY OF DEFAULT.

II. WHETHER THE TRIAL COURT ERRED IN NOT FINING AS A MATTER OF LAW THAT THE PLAINTIFF WAS NOT A LIENHOLDER UNDER MISSISSIPPI LAW.

III. WHETHER THE TRIAL COURT ERRED IN NOT FINING AS A MATTER OF LAW THAT THE PLAINTIFF WAS NOT ENTITLED TO CONTRACTUAL DAMAGES.

IV. WHETHER THE TRIAL COURT ERRED IN BASING THE JUDGMENT ON DOCUMENTS OFFERED BY THE PLAINTIFF.

V. WHETHER THE TRIAL COURT ERRED IN FINDING THAT THE PLAINTIFF'S PROOF OF DAMAGES WAS SUFFICIENT.

¶ 4. Green raises only one issue in his cross-appeal:

VI. WHETHER THE TRIAL COURT ERRED IN FAILING TO ALLOW PLAINTIFF DAMAGES FOR STORAGE OF THE SUBJECT VEHICLE.

FACTS

¶ 5. Allstate was the insurer of a 1992 BMW which is the subject of this appeal, and the BMW was leased in New York state. In October of 1992, the insured reported the vehicle stolen, and Allstate, pursuant to the terms of the insurance policy, purchased ownership of the BMW. In January of 1993, the vehicle was brought into a New York City automotive repair shop co-owned by Green. An unidentified individual left the BMW for body and mechanical work, which according to Green's testimony, was completed by workers in his shop. The person who brought the BMW to the shop to be repaired never returned for it, and after checking with the New York Motor Vehicle Bureau, Green learned that it was titled to Allstate Insurance Company, receiving a report to that effect from the MVB in March 1996.¹ Green made the first of several contacts with Allstate in 1996 by calling one of its New York adjusters and requesting a $15,000 payment for services rendered and storage.² In 1997, Green left New York and moved to Mississippi, bringing the BMW with him. He kept it stored at his apartment in Tishomingo County.

¶ 6. Green eventually filed suit asking the circuit court to enter a judgment "for labor done and material furnished in the repair of the 1992 BMW and for storage." He further asked for a special order so that he could sell the BMW at public auction and apply the proceeds toward what he was owed.

¶ 7. Following the entry of default, at a separate hearing to determine damages, Green entered into evidence an estimate of the cost of repairs given by a mechanic in Tishomingo County to whom Green described the type of damage the BMW suffered. There was no statement or other contemporaneous documentation of the specific work done in 1993, only Green's memory and recollection of it which he described in 1998 to the Tishomingo County mechanic, who was not called as a witness. Green himself did not work on the BMW at any point, and he provided scant and contradictory testimony as to the nature of the original damages on the car. In spite of that, all of Green's testimony, including the hearsay estimate of the Tishomingo mechanic, was admitted by the circuit judge.³ The trial court assessed damages of $6,727 for the New York repairs, $945 for transportation of the BMW to Mississippi and $458.80 for the Tishomingo repairs, for a total of $8,130.80. The court denied Green's request for storage fees. Allstate has appealed on all damages, and Green has cross-appealed on the storage fees.

STANDARD OF REVIEW

¶ 8. The granting or denial of a default judgment is reviewed for an abuse of discretion. King v. Sigrest, 641 So.2d 1158, 1161 (Miss.1994). However, where such a decision by a trial court is based on an erroneous conclusion of law, this Court is empowered to take corrective action. Id. at 1162. A trial court's admission or exclusion of evidence is reviewed for abuse of discretion. Thompson Mach. Commerce Corp. v. Wallace, 687 So.2d 149, 152 (Miss.1997).

DISCUSSION

I. WAS THE TRIAL COURT CORRECT IN NOT SETTING ASIDE THE ENTRY OF DEFAULT?

¶ 9. This Court considers three factors when deciding whether to vacate a default judgment: (1) whether the defendant has good cause for the default, (2) whether the defendant in fact has a colorable defense to the merits of the claim, and (3) the nature and extent of prejudice to the plaintiff if the default judgment is set aside. King, 641 So.2d at 1162 (quoting Williams v. Kilgore, 618 So.2d 51, 55 (Miss.1992)(internal citations omitted)). We have further indicated that the second factor, the presence of a colorable defense, outweighs the other two, and we have encouraged trial courts to vacate a default judgment where "the defendant has shown that he has a meritorious defense." Bailey v. Georgia Cotton Goods Co., 543 So.2d 180, 182 (Miss.1989). In Clark v. City of Pascagoula, 507 So.2d 70, 77 (Miss.1987), discussing the discretionary power that circuit court judges possess in setting aside default judgments, this Court stated: "[t]he importance of litigants having a trial on the merits should always be a serious consideration by a trial judge in such matters Thus, any error made by a trial judge should be in the direction of setting aside a default judgment and proceeding with trial." (citing Bryant, Inc. v. Walters, 493 So.2d 933 (Miss.1986)).

¶ 10. Allstate maintains that its failure to file an answer was due to excusable neglect, specifically miscommunications between its Mississippi office and its New York office over whether the BMW was actually covered by one of its policies. However, Allstate's attorney, during oral arguments for his Motion to Set Aside Default Judgment, conceded that Allstate had notice of the impending suit but could not offer any persuasive reason for why the company was unable to file a motion for additional time or information or simply file a preliminary answer and then have their questions answered in discovery. In light of those facts, and Green's assertion (which was not disputed by Allstate) that he has been trying to negotiate with the company for several years, the circuit court did not err in rejecting Allstate's excusable neglect defense.

¶ 11. However, based upon Bailey, Clark and Bryant, the circuit court did err in denying Allstate's Motion to Set Aside Entry of Default, upon showing the existence of a colorable defense. With that in mind, we address the remaining issues.

II & III. IS GREEN ENTITLED TO JUDGMENT UNDER MISSISSIPPI LAW REGARDING LIENHOLDERS AND CONTRACTUAL DAMAGES?

¶ 12. Green argues that entry of a default judgment precludes any attack on Allstate's liability—in other words, that Allstate has effectively admitted liability to Green and can only challenge the award of damages. Allstate, on the other hand, contends that the default judgment on the allegations of Green's complaint only means that Allstate has admitted that work was done on the BMW, but the legal questions concerning liability and the nature and extent of damages cannot be determined. We agree with Allstate.

¶ 13. In Dynasteel Corp. v. Aztec Indus., Inc., 611 So.2d 977, 984 (Miss. 1992), this court noted the well-established rule that "the pleadings must lay a basis for any claim upon which relief can subsequently be granted." See also Thomson v. Wooster, 114 U.S. 104, 108, 5 S.Ct. 788, 29 L.Ed. 105 (1885)(holding default judgment may be lawfully entered only "according to what is proper to be decreed upon the statements of the bill, assumed to be true," and not "as of course according to the prayer of the bill"); Nishimatsu Constr. Co. v. Houston Nat'l Bank, 515 F.2d 1200, 1206 (5th Cir.1975)("There must be a sufficient basis in the pleadings for the judgment entered"). Thus Green can only seek relief supported by the facts, not conclusions, articulated in his complaint, and if those facts do not establish a legal basis for recovery, Green is not entitled to judgment, notwithstanding Allstate's neglect in failing to answer his complaint.

¶ 14. Miss.Code Ann. § 85-7-107(1999) states in pertinent part: "All motor vehicles titled under `The Mississippi Motor Vehicle Title Law' repaired for any person, and at his instance, shall be liable for the price of the labor and material employed in constructing, manufacturing or repairing the same ...." (emphasis added). Under this plain language, a plaintiff who seeks to establish a...