Erdman v. White

• Decision Date: 23 October 1980
• Docket Number: No. 1-1079A271,1-1079A271
• Parties: Ellis ERDMAN, Defendant-Appellant, v. Steve WHITE, d/b/a Life Aviation Corp., Plaintiff-Appellee.
• Court: Indiana Appellate Court

Page 653

411 N.E.2d 653

Ellis ERDMAN, Defendant-Appellant, v. Steve WHITE, d/b/a Life Aviation Corp., Plaintiff-Appellee.

No. 1-1079A271.

Court of Appeals of Indiana, First District.

Oct. 23, 1980.

Charles G. Reeder, Thomas N. Olvey, Johnson & Weaver, Indianapolis, for defendant-appellant.

Peyton & Giddings, Lebanon, for plaintiff-appellee.

ROBERTSON, Presiding Judge.

This appeal involves the review of two separate decisions of the trial court. The first issue concerns the decision of the trial court to allow an entry of default judgment, and the second deals with a later hearing to determine damages as a result of a defamatory statement.

We affirm.

Steven White (White) was the sole stockholder in an Indiana Corporation known as Life Aviation Corporation (Life). Life was engaged in the business of buying and selling aircraft. Life's line of credit, of which White was a personal guarantor, began at $50,000 but eventually increased to $200,000. In December, 1977, certain of Life's assets were sold to Ellis Erdman (Erdman), and the corporate name was changed to Life Aeronautical Corporation. White agreed to remain as president in an advisory capacity, and the line of credit formerly extended to Life was extended to the renamed corporation with White and Erdman as personal guarantors. White resigned in June, 1978. The corporate name was later changed to Churchill Aeronautical of Indiana (Churchill). On October 19, 1978, Erdman, as Chairman of the Board of Churchill, wrote Mr. C. M. Smith, President of First Bank and Trust Company of Clay County (Bank) regarding the continuing association of the Bank and Churchill. Included in this letter was a statement regarding the "questionable reputation" of White.

Previously, on July 14, 1978, White filed a complaint in two counts based upon a promissory note, under which Churchill was obligated to White in the amount of $200,000 plus interest at 10% per annum from December 23, 1977, as a result of the sale of some of Life's assets to Churchill and Erdman. Churchill later defaulted on the note. The second count alleged Erdman to be individually liable as a co-maker and individual guarantor. The complaint was amended on November 21, 1978, to include an additional count for defamation of White's character as a result of the letter Erdman wrote to Mr. Smith at the Bank. Throughout the course of the proceedings, Erdman was represented by New York counsel, not licensed to practice in Indiana. Three different firms or individual attorneys entered appearances on behalf of Erdman as local counsel, but all eventually withdrew, although local counsel was present and of record at the crucial hearing on March 2, 1979.

White filed a motion to strike and a motion for default judgment on February 13, 1979. A hearing was held on all pending motions on March 2, 1979, at which time the court ordered Erdman to answer within 10 days, granted partial summary judgment in favor of White against Churchill as to Count I of the amended complaint, and denied with leave to refile, White's motion to strike and for default judgment.

Erdman's answer was filed by his New York attorney on March 13, 1979, and that same day the court granted White's motion to strike and for default judgment on the remaining two counts of the amended complaint. A hearing on damages as to the defamation count was held on June 4, 1979.

In sum, White recovered from Churchill via the summary judgment $22,552.91 plus costs of the action. White also recovered $22,631.52 plus the costs of the action from Erdman based on his individual liability for the promissory note under Count II of the amended complaint. Finally, White was awarded $65,000 from Erdman based on the defamation cause of action alleged in Count III of the amended complaint.

Erdman has presented seven issues for our determination on appeal. As many of the issues deal with different aspects of the general issue, our discussion will focus on two considerations. First, was the entry of default judgment against Erdman as to Count II and Count III of White's amended complaint an abuse of the court's discretion. Secondly, was the communication in question defamatory, and if so, was the damage amount excessive and supported by sufficient evidence.

We first turn to the question of the default judgment. In resolving this question it is important to look at the sequence of events that led to the entry of the default judgment.

February 13, 1979-White files motion for default judgment and motion to strike.

February 27, 1979-F. Bradford Johnson files appearance as Erdman's local counsel.

March 2, 1979-By court order, court gives Erdman 10 days to answer; denies White's motion to strike with leave to renew if answer not filed and; denies application for default judgment. Court also grants partial summary judgment against Churchill as to Count I of White's amended complaint.

March 13, 1979-Johnson files motion to withdraw his appearance.

March 13, 1979-Erdman files answer and counterclaim by his New York attorney.

March 13, 1979-White files verified motion to strike and renew application for default judgment.

March 13, 1979-Court grants default judgment against Erdman as to Count II, and also finds in favor of White on Count III relating to defamation with a hearing to determine damages to be held at a later date.

Erdman first argues the trial court erred in finding that his answer was not filed within the time period allowed by the court. On March 2, 1979, the court gave Erdman 10 days within which to answer. The answer was filed on March 13, 1979. In support of his contention, Erdman claims that Indiana Rules of Procedure, Trial Rule 6(E) allows three days to be added to the prescribed period when service is made by mail. Since Erdman's New York counsel was advised of the court's order by mail, Erdman contends that he had until March 15, 1979, to file his answer. This claim is meritless, in that the court's order was read in open court with Erdman's local counsel present. Although Erdman's New York attorney was notified by mail, that notification came from local counsel who was still on record as Erdman's attorney. The additional three days provided by T.R. 6(E) does not inure to Erdman's benefit as local counsel was present when the court's order was read.

Erdman next alleges the default judgment was improper because his answer was filed, (albeit after the court's time period had expired,) before the application of default judgment was refiled by White. In support of this position, Erdman cites Hiatt v. Yergin, (1972) 152 Ind.App. 497, 284 N.E.2d 834. Hiatt, supra, contains very broad language regarding default judgments.

A delinquent party only need be nimble enough to plead or otherwise comply with the rules within the three-day period in order to avoid the default question entirely. Yergin wisely filed a responsive pleading on May 4, the very day Hiatt filed the Application for Default Judgment. Thus the question became moot even before a hearing could be held under the three-day notice requirement.

Hiatt, 152 Ind.App. at 509, 284 N.E.2d at 841.

This language would appear to imply that as long as some type of responsive pleading is filed within the three day period contained in Indiana Rules of Procedure, Trial Rule 55(B), a default judgment can be avoided. This language has been commented upon in two separate decisions by this panel. In Clark County State Bank v. Bennett, (1975) 166 Ind.App. 471, 475, 336 N.E.2d 663, 666, Judge Lybrook declared:

We are unable to approve of this holding to the extent that it may be construed to vest a delinquent party with the absolute option to sua sponte cure its default and proceed as a matter of right without judicial approval at any time prior to the entry of judgment by default.

Judge Lybrook responded to this issue again in Snyder v. Tell City Clinic, (1979) Ind.App., 391 N.E.2d 623, 626, wherein this court by way of a footnote overruled the broad language quoted above in Hiatt and reiterated that "the three day notice requirement of an application for judgment by default is not to provide a delinquent party further time in which to plead and thereby entirely avoid the question of default, ...." We once more decline to accept the broad language of Hiatt, and reaffirm the position espoused by Judge Lybrook in Clark County State Bank and Tell City Clinic.

Indiana Rules of Procedure, Trial Rule 55 deals with default judgment and states in relevant part:

(A) Entry. When a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise comply with these rules and that fact is made to appear by affidavit or otherwise, the party may be defaulted.

(B) Default judgment. In all cases the party entitled to a judgment by default shall apply to the court therefor ... If the party against whom judgment by default is sought has appeared in the action, he (or, if appearing by a representative, his representative) shall be served with written notice of the application for judgment at least three (3) days prior to the hearing on such application.

A concise summary of the law dealing with default judgments was set forth in Green v. Karol, (1976) 168 Ind.App. 467, 344 N.E.2d 106. It is clear that the decision whether or not to enter a judgment by default is within the sound discretion of the trial court, and the trial court's discretion is considerable. Green, supra. Therefore, the trial court's decision will be reversed only upon a showing of a clear abuse of that discretion. Green, supra ; Clark County State Bank v. Bennett, (1975) 166 Ind.App. 471, 336 N.E.2d 663. In reviewing a motion for a default judgment, the trial court must balance many factors in...