Brandenburg v. Feterl Mfg. Co., 98-04.
| Decision Date | 22 December 1999 |
| Docket Number | No. 98-04.,98-04. |
| Citation | 603 N.W.2d 580 |
| Parties | Sheila Kristin BRANDENBURG, Executor of the Estate of Stephen Francis Brandenburg, Deceased; Sheila Kristin Brandenburg, Individually; Matthew Brandenburg; Mark Brandenburg; and Sheila Brandenburg, As Mother and Next Friend of Seana Brandenburg, Alexander Brandenburg, and Joseph Brandenburg, Minors, Appellees, v. FETERL MFG. CO., A Subsidiary of Core Industries, Inc., Appellant. |
| Court | Iowa Supreme Court |
John C. Gray of Heidman, Redmond, Fredregill, Patterson, Plaza & Dykstra, L.L.P., Sioux City, for appellant.
Joseph L. Fitzgibbons of Fitzgibbons Law Firm, Estherville, for appellees.
Considered by McGIVERIN, C.J., and CARTER, LAVORATO, NEUMAN, and TERNUS, JJ.
The defendant in this personal injury action appeals from a district court ruling denying the defendant's motion to set aside a default and default judgment entered in favor of the plaintiffs. We conclude there was not substantial evidence to support the district court finding that the defendant willfully ignored and defied the rules of procedure in failing to defend in a timely manner. We therefore hold the district court abused its discretion in concluding there was no excusable neglect constituting good cause to set aside the default and default judgment. We therefore reverse and remand with directions and for further proceedings consistent with this opinion.
On February 2, 1996, Stephen Brandenburg was killed while using a grain auger allegedly manufactured by Feterl Manufacturing Company. Feterl is a South Dakota corporation and is a subsidiary of Core Industries, Inc., a Michigan corporation. Helen and Gary Brown allegedly owned the auger, which Stephen was apparently using in the course of doing work for them on their farm.
Several days after the accident, Ronald Feterl (a former Feterl employee) read a newspaper article about the accident. He sent a copy of the article to Don Jensen, a Feterl sales representative. Jensen immediately forwarded the newspaper article to Darrell Streff, president of Feterl.
After receiving the article on February 6, Streff immediately contacted Tony Krull. Krull is the manager of insurance and employee benefits at Core. Streff did not know any details surrounding Stephen's death other than that Stephen had been killed while using an auger allegedly made by Feterl. However, Streff did fax Krull a copy of the newspaper article and a handwritten note regarding the auger.
Krull faxed this information to Jim Warzyniec, an account executive for Willis Corroon. Willis Corroon is a global insurance brokerage firm. Core is a client of the firm, and Warzyniec handles Core's accounts with Willis Corroon. Krull's fax requested Warzyniec to notify Core's primary and excess liability carriers of the accident, even though Feterl had not itself been formally notified of it.
Willis Corroon contacted Travelers, Core's primary liability carrier, about the accident. On February 27 Travelers sent a letter to Krull, advising him that Travelers had been notified of the accident and requesting that Krull contact Travelers if a lawsuit was filed. Later, Krull advised Warzyniec of Travelers' acknowledgment.
In December 1996 the claims administration for Willis Corroon was moved to Willis Corroon Administrative Services (WCAS), a third-party claims administrator that handles claims for Willis Corroon. Both entities are in the same building. Steve Smith is the claims manager for WCAS.
On April 27, 1997, the plaintiffs filed this lawsuit against Feterl, alleging that the defendant had negligently caused Stephen's death. The plaintiffs also alleged that the Browns' negligence was a proximate cause of his death. The plaintiffs are Sheila Kristin Brandenburg as executor of Stephen's estate and individually; Matthew Brandenburg and Mark Brandenburg (Stephen's adult children); and Sheila Kristin Brandenburg as mother and next friend of Seana Brandenburg, Alexander Brandenburg, and Joseph Brandenburg, minors. The petition asked for damages for the estate as well as loss of consortium for Sheila and for the five children.
On April 28 a deputy sheriff of McCook County, South Dakota, served a copy of the original notice and petition on Feterl by serving Streff. Streff immediately faxed copies of the documents to Krull and asked that Feterl's insurance carriers be notified.
Krull called Streff to acknowledge that he had received the fax and told Streff he would notify Willis Corroon. He also told Streff that (1) he would send the suit papers to the insurance company; (2) Steve Smith of WCAS would be the claims representative handling the lawsuit; and (3) if Streff did not hear from Smith within a couple of days, that Streff should call Smith. During this conversation, Streff and Krull discussed Doug Oelschlaeger as a possible attorney for the case. According to Streff, Oelschlaeger had worked on a previous case for Feterl in Iowa. Streff and Krull knew that, while they could recommend an attorney, Feterl's insurance carriers were responsible for actually selecting an attorney to defend the lawsuit. On April 29 Krull mailed the suit papers along with a cover letter to Warzyniec in which Krull asked that the suit papers be forwarded to Feterl's insurance carriers. Warzyniec never received the letter. A copy of the letter and its contents were also mailed to Frank Brochert, who received them on May 2. Brochert is an attorney for the Detroit law firm of Plunkett & Cooney. Brochert, a products liability specialist, has in the past worked with Core on various claims and settlements. Core hired Brochert to review suit papers, answer Krull's questions, and to act as a buffer between Core and the carriers and the lawyer the carriers select. Smith could consult with Brochert on selection of counsel, but Core did not expect Brochert to select counsel or to appear himself in any lawsuit.
Brochert and Krull spoke by phone, and Krull asked Brochert to review the suit papers and file them for future reference. No one asked Brochert to hire defense counsel for this lawsuit or to answer the petition. Brochert did not contact Willis Corroon or Travelers to see if the lawsuit was being handled. Nor did he contact anyone at Core to discuss the lawsuit after his initial conversation with Krull.
By May 7 Streff had not yet heard from Smith. On that date—per Krull's previous direction—Streff contacted Smith by phone. Smith told Streff that he— Smith—had not taken any action on the lawsuit because he had not yet received the suit papers from Warzyniec. During this conversation, Streff told Smith that an answer had to be filed by May 18 to avoid a default. Streff also told Smith he would fax Krull a recommendation for an attorney for the case. Thereafter, Streff faxed such a recommendation to Krull, and Krull received the fax. Apparently, there was little subsequent communication among Streff, Krull, Brochert, Warzyniec, and Smith about the lawsuit. Streff did not follow up with Smith a second time to make sure Smith had received the suit papers from Warzyniec.
On May 29—thirty-one days after Feterl was served—the district court held a hearing on the plaintiffs' motion for default and default judgment. Feterl was not notified of the hearing. Neither Feterl nor anyone appearing for it attended the hearing. The Browns had filed an answer and a waiver of notice and opportunity to be present at the hearing. The district court entered a default judgment against Feterl for $1,130,215.
The clerk of court mailed a copy of the default judgment to Feterl on June 30, 1997. On July 1 Streff faxed copies of the default judgment to Krull and Smith. Thereafter, Smith called Streff, apologized for the default, and said he had forgotten about the lawsuit.
On July 8 Feterl filed a motion to set aside the default pursuant to Iowa Rule of Civil Procedure 236 (). Following a hearing on the motion, the district court issued its ruling. The court first found there was no basis to set aside the default judgment for mistake, surprise, or unavoidable casualty—three of the five grounds for setting aside a default judgment under rule 236.
The court concluded that inadvertence and excusable neglect—the remaining two grounds—were "barely distinguishable" and considered them together. In doing so, the court focused on our holding in Central National Insurance Co. of Omaha v. Insurance Co. of North America, 513 N.W.2d 750 (Iowa 1994). In that case, we set out several factors for determining "excusable neglect" constituting good cause. The district court found against Feterl as to one of those factors—whether the defaulting party willfully ignored or defied the rules of procedure. For that reason the district court denied Feterl's motion to set aside the default judgment. Feterl appealed, contending, among other things, that the district court abused its discretion in refusing to set aside the default and default judgment pursuant to rule 236.
(Emphasis added.)
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