Carvey v. Indiana Nat. Bank

• Decision Date: 18 April 1978
• Docket Number: No. 2-776A251,2-776A251
• Citation: 374 N.E.2d 1173,176 Ind.App. 152
• Parties: John C. CARVEY, Defendant-Appellant, v. INDIANA NATIONAL BANK, Plaintiff-Appellee.
• Court: Indiana Appellate Court

Page 1173

374 N.E.2d 1173

176 Ind.App. 152

John C. CARVEY, Defendant-Appellant, v. INDIANA NATIONAL BANK, Plaintiff-Appellee.

No. 2-776A251.

Court of Appeals of Indiana, Second District.

April 18, 1978.

John C. Carvey pro se.

Robert D. Morgan and Robert S. Hulett, Smith, Morgan & Ryan, Indianapolis, for plaintiff-appellee.

LOWDERMILK, Judge.

This case was transferred to this office from the Second District in order to help eliminate the disparity in caseloads among the Districts.

STATEMENT OF THE CASE

Defendant-appellant John C. Carvey (Carvey) appeals from the denial of his motions to set aside a default judgment obtained by plaintiff-appellee Indiana National Bank (Indiana National).

We reverse and remand.

FACTS

The following facts are disclosed by the record. Although many of the facts are provided in affidavits filed by Carvey, his statements were not controverted by Indiana National or its counsel, except as indicated. ¹

1. On December 15, 1967, Interstate Inns, Inc. executed a promissory note payable to The Indiana National Bank of Indianapolis (predecessor to Indiana National). This note was renewed from time to time thereafter.

2. Carvey and seven other persons executed an unconditional guaranty on July 24, 1968. This guaranty imposed joint and several liability upon each signer for amounts up to and including sixty thousand dollars for obligations of Interstate Inns, Inc. to Indiana National.

3. Interstate Inns, Inc. subsequently went through bankruptcy proceedings. Indiana National filed its claim for $56,700.00 plus 8% Interest. Indiana National received $35,417.87 from the bankruptcy proceedings and then looked to the individual guarantors for payment of the remainder.

4. The firm of Smith, Morgan and Ryan represented Indiana National. Robert D. Morgan, James R. McClarnon, and Robert S. Hulett were members or associates of said firm during the events considered in this appeal.

5. During the summer and early fall of 1975, Hulett initiated telephone conversations with Carvey, who also is an attorney, concerning liability of the guarantors. During these conversations, Carvey stated that he was willing to pay his pro rata share of the balance due on Interstate's obligation. This pro rata share was estimated by Hulett and Carvey to be approximately $4,300.00. Hulett indicated that Indiana National was agreeable to this offer.

6. Hulett informed Carvey that, in order to preserve appearances, Indiana National would probably sue all guarantors, or at least those in Indiana; Hulett also informed Carvey that a final settlement with any guarantors willing to pay a pro rata share might have to wait until suit was processed against uncooperative guarantors.

7. Carvey told Hulett that Carvey had no desire to participate in litigation. Carvey further stated to Hulett that Carvey would not actively defend against such a lawsuit but instead would stand ready to pay his pro rata share when called upon by Indiana National to do so.

8. On November 7, 1975, Indiana National filed its complaint against five of the eight guarantors. In Count Five of its complaint Indiana National prayed for judgment against Carvey for the full amount allegedly due ($30,288.10 plus interest at the rate of 8% From January 15, 1975) plus attorney fees of $9,000.00. Service of process was made on Carvey November 11, 1975.

9. Carvey filed no appearance and filed no answer. Carvey later averred that his inaction was grounded solely upon his understanding, resulting from conversations with Hulett, that the lawsuit was solely for the purpose of pursuing uncooperative guarantors.

10. Indiana National filed its application for default judgment against Carvey January 5, 1976. It also filed a notice of application for default judgment, which stated that Indiana National would apply to the trial court for entry of default judgment on January 22, 1976. Carvey received the notice on or before January 20, 1976, after he returned from a vacation.

11. On January 20, 1976, Carvey unsuccessfully attempted to telephone Morgan. When his efforts to reach Morgan again proved fruitless on the morning of January 21, 1976, Carvey proceeded to file his answer, including an affirmative defense, at approximately 1:30 p. m. on that date. Carvey hand-delivered a copy of his answer to the law firm of Smith, Morgan and Ryan and asked the receptionist to bring the answer to the attention of Hulett immediately.

12. Carvey continued his attempts to contact Morgan by telephone and succeeded at approximately 9:30 p. m. on January 21, 1976. Carvey informed Morgan that Carvey had filed an answer that date. Carvey further informed Morgan that Carvey remained ready to pay his pro rata share.

13. Morgan responded during that telephone conversation by stating that (a) he was glad that Carvey no longer was in default; (b) Hulett was out of the city and would not return until January 26; and (c) Morgan would inform Hulett of the telephone conversation and of Carvey's position when Hulett returned.

14. Carvey later averred that, solely because of statements made by Morgan during this telephone conversation, Carvey did not appear in court on January 22, 1976.

15. On January 22, 1976, McClarnon obtained a default judgment against Carvey, on behalf of Indiana National, which judgment reads, in part, as follows:

"IT IS THEREFORE ORDERED, ADJUDGED AND DECREED that:

1. The defendant, John C. Carvey, was served with summons and a copy of plaintiff's complaint by the Sheriff of Marion County, pursuant to the Indiana Rules of Civil Procedure.

2. The defendant, John C. Carvey, has made neither an appearance in this action nor has he filed his answer.

3. That The Indiana National Bank is entitled to, and judgment is herein entered for plaintiff in the amount of $32,578.11 plus interest at 8% Per annum from January 15, 1975, for a total of $35,084.25, plus reasonable attorney fees in the amount of $9,000.00, for a total judgment of $44,084.25, together with costs of this action and interest on the judgment until paid."

16. On January 28, 1976, Morgan called Carvey and informed him of the default judgment. Morgan stated that Carvey's answer had not been brought to the attention of the attorneys of record (Hulett and McClarnon) until January 26, 1976.

17. Carvey filed a motion to set aside default judgment January 30, 1976, alleging that he had filed an answer January 21, 1976. An affidavit explained his personal service of the answer and his conversation with Morgan.

18. Indiana National filed a response February 11, 1976, arguing that the entry of default judgment was proper despite the fact that Carvey had filed a tardy answer. The trial court denied Carvey's motion February 13, 1976.

19. Carvey filed an amended motion to set aside default judgment February 20, 1976. His affidavit accompanying that motion set forth the information contained in the paragraphs above. He contended that relief should be granted pursuant to Ind.Rules of Procedure, TR 60(B)(1) (mistake, surprise or excusable neglect), TR 60(B)(3) (fraud, misrepresentation, or other misconduct of an adverse party), and TR 60(B)(8) (any other reason justifying relief from the operation of the judgment).

20. Indiana National, by McClarnon and Hulett, filed a response February 23, 1976. In that response Indiana National argued that (a) Carvey had exhausted his TR 60 remedy with his first motion and could not raise new issues in an amended TR 60 motion filed after the first motion was denied; (b) Carvey had refused to pay a pro rata share despite Indiana National's demand by letter dated July 30, 1975, for a payment of a pro rata share in the amount of $7,797.02; (c) several other guarantors had responded to such a letter and had paid their pro rata shares; and (d) "Defendant's account of telephone calls and late pleading has no meaning. He knew of the hearing on the default and chose not to appear."

21. The trial court denied Carvey's amended motion February 27, 1976.

22. Carvey filed a motion to vacate entry overruling motion to set aside default judgment on March 8, 1976. He stated that (a) he had filed his initial TR 60 motion with the belief that McClarnon had obtained the default judgment solely because McClarnon did not realize that an answer had been filed the preceding day; (b) Carvey had no reason to believe otherwise until he received the response which was filed by Indiana National February 11, 1976, but not received by Carvey until February 14, 1976 (which was after the trial court had ruled on his initial TR 60 motion); (c) Carvey never received the letter purportedly mailed to him July 30, 1975, by Smith, Morgan & Ryan; (d) if Indiana National had received $7,797.02 from each of several guarantors, as stated in its response, Indiana National should not receive from Carvey the difference between the full amount of Interstate's debt and the amount received from the bankruptcy proceedings. Additionally, Carvey set forth his account of events which had occurred earlier.

23. Indiana National, by McClarnon and Hulett, filed a response in which it argued that Carvey's TR 60 remedy had been exhausted with his initial motion.

24. On March 18, 1976, the trial court held a hearing on Carvey's motion to vacate. Hulett and McClarnon were not present; Morgan represented Indiana National at the hearing. Carvey, the sole witness, recounted the relevant events which had occurred prior to the hearing. Morgan commented to the trial court that Carvey had failed to tender payment of a pro rata share. The trial court denied Carvey's motion.

25. By certified letter dated March 19, 1976, McClarnon informed Carvey that no pro rata payment by Carvey would be acceptable.

26. Carvey filed a motion to correct errors March 22, 1976, which the trial court denied April 12, 1976.

ISSUES

Carvey asks this court to consider two issues:

1. Did the trial court err in refusing to set aside the default judgment...