Co. v. C. Soja

• Decision Date: 12 August 2010
• Docket Number: No. 71A03-1002-CT-104.,71A03-1002-CT-104.
• Citation: 932 N.E.2d 245
• Parties: SEARS ROEBUCK AND COMPANY, Appellant-Defendant, v. Michael C. SOJA, a Minor by his Mother and Next Best Friend, Vicky JAMES, and Vicky James, Individually, Appellees-Plaintiffs.
• Court: Indiana Appellate Court

932 N.E.2d 245

SEARS ROEBUCK AND COMPANY, Appellant-Defendant,

v.Michael C. SOJA, a Minor by his Mother and Next Best Friend, Vicky JAMES, and Vicky James, Individually, Appellees-Plaintiffs.

No. 71A03-1002-CT-104.

Court of Appeals of Indiana.

Aug. 12, 2010.

COPYRIGHT MATERIAL OMITTED.

Michael G. Getty, Rori L. Goldman, Hill Fulwider McDowell Funk & Matthews, Indianapolis, IN, Attorneys for Appellant.

Richard W. Morgan, Douglas E. Sakaguchi, Pfeifer Morgan & Stesiak, South Bend, IN, Attorneys for Appellees.

OPINION

RILEY, Judge.

STATEMENT OF THE CASE

Appellant-Defendant, Sears Roebuck and Company (Sears), appeals the trial court's Order refusing to set aside a default judgment entered in favor of Appellees-Plaintiffs, Michael C. Soja, a Minor by His Mother and Next Best Friend, Vicky James, and Vicky James Individually (collectively, James) on James' Complaint asserting product liability and negligence against Sears.

We affirm.

ISSUES

Sears presents two issues on appeal which we restate as follows:

(1) Whether the trial court abused its discretion when it refused to set aside a default judgment based on excusable neglect due to a breakdown in communication; and

(2) Whether James' counsel's conduct mandated a setting aside of the default judgment in accordance with Indiana Trial Rule 60(B)(3).

FACTS AND PROCEDURAL HISTORY

On October 11, 2005, eleven-year-old Michael Soja (Michael) fell from a Razor Electric Scooter and injured his arm. Because of this accident, Michael's mother, Vicky James filed a Complaint against Sears and Razor on June 5, 2007, alleging that Razor defectively manufactured and designed the scooter and that Sears negligently sold and distributed the scooter. On June 12, 2007, the Complaint was served on Sears' registered agent. The Complaint was forwarded to the Sears Legal Department and then to Sedgwick CMS (Sedgwick), Sears' third-party administrator, where the case was assigned to claims examiner, Nancy Hall (Hall). Hall is a level three claims examiner and handles solely litigation files.

On June 19, 2007, after having received the Complaint, Hall contacted Richard Morgan (Morgan), James' counsel. She informed him that she was the third-party administrator for Sears and in charge of the claim filed against the company. In turn, Morgan clarified the factual basis for the claim. No other communications occurred between Hall and Morgan during these proceedings.

Also that same day, Hall contacted John Cochrane (Cochrane), general counsel for Razor, and requested that Razor defend and indemnify Sears in the lawsuit, as required under the terms of the Universal Terms and Conditions (UTC), which exists between the two companies. During their conversation, Cochrane informed Hall that he was aware of the lawsuit as he had received a demand package from James' counsel in June of 2006. He also acknowledged Razor's obligation under the UTC and told Hall that Razor had already appointed an attorney, John Obenchain (Obenchain), to defend both Razor and Sears in the litigation. Pursuant to the UTC, Sears was not required to send Cochrane a written notice; nevertheless, the evidence reflects that Cochrane waited to receive a written tender from Hall confirming Razor's duty to defend Sears. Because Hall never sent a written confirmation, Cochrane did not instruct Obenchain to appear for Sears.

On January 31, 2008, Hall sent an email to Cochrane inquiring into the status of the suit. Because she used an incorrect email address, Hall never received a response. On April 30, 2008, Hall sent a second email to Cochrane, again to an incorrect email address. On May 30, 2008, Hall left a voice mail for Cochrane requesting information on the status of the suit but he did not return her phone call. Later that same day, Hall contacted Obenchain, the attorney appointed by Razor. During the conversation, Obenchain told Hall that he was never instructed to appear for and represent Sears and that, by now, Sears had been defaulted by the trial court. When Hall tried to confirm Obenchain's information, she learned that Cochrane had not requested Obenchain to appear for Sears because Cochrane had not received a written notice of tender from Hall.

Procedurally, after a Complaint was filed on June 5, 2007, Obenchain appeared for Razor on June 21, 2007. On October 8, 2007, the trial court entered a Default Order against Sears. On November 8, 2007, after conducting a damages hearing, the trial court entered judgment against Sears in the amount of $107,000 in damages. On July 7, 2008, after being advised of the default judgment, Hall retained counsel for Sears who filed a motion to set aside the trial court's Default Order. On August 8, 2008, the trial court issued an order allowing James to conduct discovery prior to James filing their response to Sears' motion to set aside. On December 28, 2009, James filed their response. Thereafter, on January 25, 2010, the trial court conducted a hearing on Sears' motion to set aside the default judgment which the trial court denied the same day.

Sears now appeals. Additional facts will be provided as necessary.

DISCUSSION AND DECISION

I. Excusable Neglect

Sears contends that the trial court abused its discretion when it failed to set aside the default judgment based on excusable neglect. Specifically, Sears maintains that after receiving explicit representations from Cochrane that he had retained counsel to defend Sears, Hall had a reasonable belief that she had done everything necessary to protect Sears' interests in this lawsuit. A breakdown in communication then occurred when Cochrane failed to instruct Obenchain to appear for and defend Sears, believing that he would receive written confirmation of tender from Hall. On the other hand, James argues that the breakdown in communication amounts to a mere neglect, not an excusable neglect. As such, the default judgment should not be set aside.

Pursuant to Indiana's trial rules, once entered, a default judgment may be set aside because of mistake, surprise, or excusable neglect so long as the motion to set aside the default judgment 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, 179 Ind.App. 530, 386 N.E.2d 960, 961 (Ind.App.1979)). Though the trial court should do what is “just” in light of the facts of the 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). On appeal, a trial court's decision to set aside a default judgment is entitled to deference and is reviewed for an abuse of discretion. 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. Green v. Karol, 168 Ind.App. 467, 344 N.E.2d 106, 111 (Ind.App.1976). Although a default judgment plays an important role in the maintenance of an orderly, efficient judicial system as a weapon for enforcing compliance with the rules of procedure and for facilitating the speedy determination of litigation, in Indiana there is a marked judicial deference for deciding disputes on their merits and for giving parties their day in court, especially in cases involving material issues of fact, substantial amounts of money, or weighty policy determinations. Charnas v. Estate of Loizos, 822 N.E.2d 181, 185 (Ind.Ct.App.2005).

In several different cases with varied outcomes, our courts 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, 289 (Ind.1983), our supreme 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 between the two insurance companies involved, the insurer never received notice of the suit. Id. at 290. The court 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 that there was excusable neglect, justifying setting aside the default judgment.” Id. at 291.

In Siebert Oxidermo, Inc. v. Shields, 446 N.E.2d 332, 334 (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. The evidence established that no reason was given by the insurance agent as to why the suit papers had remained in his office for a month without taking any action. Id. at 340. Our supreme court 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.

In Whittaker v. Dail, 584 N.E.2d 1084, 1087 (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. Id. at 1085. Upon receiving notice of a pre-trial conference, he called his insurance...