Ex Parte Overton

• Decision Date: 09 November 2007
• Docket Number: 1050973,1051505.
• Parties: Ex parte Allen M. OVERTON and Cindy Waldrop. (In re Allen M. Overton and Cindy Waldrop v. Prince Family Housing, Inc., Michelle Brown, and North River Insurance Company). Allen M. Overton and Cindy Waldrop v. North River Insurance Company.
• Court: Alabama Supreme Court

985 So.2d 423

Ex parte Allen M. OVERTON and Cindy Waldrop.

(In re Allen M. Overton and Cindy Waldrop v. Prince Family Housing, Inc., Michelle Brown, and North River Insurance Company).

Allen M. Overton and Cindy Waldrop v. North River Insurance Company.

1050973

1051505.

Supreme Court of Alabama.

November 9, 2007.

Ted Taylor, Leah O. Taylor, and Rhonda Pitts Chambers of Taylor & Taylor, Birmingham; and Charles R. Hare, Jr., of Gullahorn & Hare, P.C., Albertville, for petitioners/appellants Allen M. Overton and Cindy Waldrop.

Claude E. Hundley III and Jeffrey T. Kelly of Lanier Ford Shaver & Payne, P.C., Huntsville, for respondent/appellee North River Insurance Company.

BOLIN, Justice.

Allen M. Overton and Cindy Waldrop petition for a writ of mandamus compelling Judge Tim Jolley of the Marshall Circuit Court to vacate his order of March 6, 2006, granting the Rule 60(b), Ala. R. Civ. P., motion of North River Insurance Company ("North River") and vacating default judgments entered in 2002 against North River's insured, Prince Family Housing, Inc. ("Prince"), and Prince's employee, Michelle Brown. Prince is in the business of selling manufactured homes. We grant the petition and issue the writ.

Overton and Waldrop also filed an appeal, case no. 1051505, out of an "abundance of caution" in the event this Court determined that the trial court's order setting aside the default judgments was an appealable order. An order granting a motion seeking relief from a judgment under Rule 60(b), Ala. R. Civ. P., is generally considered an interlocutory order because further proceedings are contemplated by the trial court; therefore, such an order is not appealable. R.E. Grills, Inc. v. Davison, 641 So.2d 225 (Ala.1994); Ex parte Short, 434 So.2d 728 (Ala.1983). It is only in some circumstances that an order granting relief under Rule 60(b) is treated as a final judgment for purposes of appeal. See Sanders v. Blue Cross-Blue Shield of Alabama, Inc., 368 So.2d 8 (Ala.1979). In Sanders, the plaintiff filed an action in the circuit court, alleging tort claims against Blue Cross-Blue Shield. Those claims were subsequently dismissed. The plaintiff then filed an action in the district court, alleging breach-of-contract claims against Blue Cross-Blue Shield. Blue Cross-Blue Shield pleaded the affirmative defense of res judicata. Before the district court ruled, the plaintiff returned to the circuit court and filed a Rule 60(b) motion seeking to set aside the dismissal. The circuit court granted the motion, noting that the plaintiff had not alleged breach of contract in his complaint in the circuit court. The circuit court's order was final because no further proceedings were contemplated in the circuit court and the plaintiff intended to proceed in the district court, the contract claim being within the jurisdictional limit of the district court. Therefore, this Court denied Blue Cross-Blue Shield's petition for a writ of mandamus, holding that the Rule 60(b) order granting relief was sufficient to support an appeal. In the present case, however, review by a petition for a writ of mandamus is appropriate. Therefore, we dismiss the appeal.

North River issued a commercial general-liability insurance policy to Prince effective for the year ending January 5, 2000. The insurance policy provided that North River would pay those sums the insured became legally obligated to pay as damages because of bodily injury or property damage covered by the insurance policy.

Blythe Insurance Agency obtained the policy for Prince through an insurance broker, Acordia of Michigan; Denis Porter was the Blythe employee who sold the policy to Prince. Acordia represents insurance companies that offered a specialty line of insurance for mobile-home retail-sales dealers. Acordia would send Blythe a statement each month, and Blythe would collect the premiums from the insured (in this case, Prince) and send Acordia a check for the amount received less its commission. Blythe's name and address appeared on the face of the policy issued to Prince in the space designated "Agent Name and Address." Blythe is referred to as the "agent" on five other pages in the policy. Blythe's address is the only address contained in the policy.

In May 2000, First Merit Bank, N.A., sued Prince and its employees, Michelle Brown and Patrick Boatright, alleging that the defendants misrepresented certain information to the bank to obtain financing for a mobile home purchased by Overton for Waldrop. Merit Bank claimed breach of the universal lender-dealer agreement it had entered into with Prince and sought damages in the amount of the unpaid loan plus interest, costs, and attorney fees. Prince gave Blythe notice of the action; Blythe, in turn, gave notice to Crum & Forster Insurance Company on June 14, 2000, by facsimile. North River is a subsidiary of Crum & Forster. According to the testimony of Phillip Blythe, the owner of Blythe, Acordia had instructed Blythe to send all notices of claims involving insureds directly to the insurance company involved. Phillip Blythe testified that in accordance with those instructions, Blythe, acting on behalf of its insured, would forward claims directly to the insurance company. Blythe used its own forms for such notices.

On June 15, 2000, Crum & Forster acknowledged receipt of the notice of Merit Bank's action against Prince, denied Prince's request for coverage, and refused to provide it with a defense. Blythe was sent a copy of the denial letter. Overton and Waldrop concede that the policy did not provide coverage for the claims Merit Bank asserted against Prince.

On December 11, 2000, Prince and its employees filed a third-party complaint against Overton and Waldrop, claiming that Overton and Waldrop made false representations to them, which they, in turn, submitted to Merit Bank. On July 6, 2001, Overton and Waldrop filed a counterclaim against Prince and its employees, including claims of breach of contract and fraud. Overton and Waldrop state that Prince and its employees failed to appear and defend the counterclaim, and on August 27, 2001, they filed a motion for a default judgment against Prince and its employees. On August 28, 2001, counsel for Overton and Waldrop received documents as a result of a third-party subpoena that indicated that North River had issued the insurance policy to Prince and that Blythe was the agent. That same day, counsel faxed a copy of the motion for a default judgment and mailed a copy of the motion and counterclaim to Blythe. On October 1, 2001, counsel sent another letter to Blythe, enclosing copies of the applications for entry of default and supporting affidavits.

On December 3, 2001, Prince and Brown each filed Chapter 7 bankruptcy petitions. Overton and Waldrop filed motions with the bankruptcy court seeking relief from the automatic stay in both cases. In separate agreements filed in the two bankruptcy cases, Overton and Waldrop entered into agreements with Prince and Brown providing that the motions for relief from the automatic stay could be granted for the sole purpose of allowing Overton and Waldrop to pursue their claims against Prince and Brown in the state court. The agreements further provided that Overton and Waldrop could "seek to enforce any judgment obtained against the debtor solely against any available proceeds of insurance, but the automatic stay shall continue in effect as to any attempts to collect any monies from the debtor or assets of the debtor or to otherwise enforce any judgment against the debtor." On February 26, 2002, the bankruptcy court approved the agreements.

On April 25, 2002, default judgments were entered in favor of Overton and Waldrop and against Prince and Brown, in the total amount of $3 million. Overton was awarded $250,000 in compensatory damages and $250,000 in punitive damages against Brown and the same amount against Prince. Waldrop was awarded $500,000 in compensatory damages and $500,000 in punitive damages against Brown and the same amount against Prince. No default judgment was entered against Boatright.¹

On June 6, 2002, Overton and Waldrop filed a garnishment proceeding against North River, which responded: "No coverage. No contractual liability to [Prince and Brown]." They filed a motion contesting North River's answer to the garnishment process, and the trial court established the issue before it as: "Whether or not North River Insurance Co. owes coverage to Prince Family Housing under the allegations in this case as proven." On October 28, 2003, North River filed a Rule 60(b), Ala. R. Civ. P., motion to set aside the default judgments entered against its insureds.²

Overton and Waldrop state that, over the next three years, they and North River engaged in discovery regarding the issue to be tried in the garnishment proceedings and that on March 6, 2006, the trial court entered an order purporting to set aside the default judgments, stating:

"This matter is before the Court on the motion of the garnishee, The North River Insurance Company ('North River'), for relief from default judgments under Ala. R. Civ. P. 60(b). After considering the evidence, briefs, and oral argument of the parties, the Court concludes that North River is entitled to relief from judgments under Rule 60(b)(4), because North River did not receive notice before, or promptly after, the default judgments were entered. The judgments are void for that reason. Moreover, even if the judgments were not void, the Court concludes that North River would be entitled to relief under Rule 60(b)(6), for the reasons advanced by North River in its motion and supporting briefs. The Court notes that, in reaching this conclusion, the Court applied the factors specified in Kirtland v. Ft. Morgan Authority Sewer Service, Inc., 524 So.2d 600 (Ala.1988), and determined that all of those factors support an order granting relief from the default judgments entered in this case. North...