GTE Automatic Elec., Inc. v. ARC Industries, Inc.

• Decision Date: 21 July 1976
• Docket Number: No. 75-1011,75-1011
• Citation: 351 N.E.2d 113,1 O.O.3d 86,47 Ohio St.2d 146,1 O.O.2d 146
• Parties: , 1 O.O.3d 86 GTE AUTOMATIC ELECTRIC, INC., Appellee, v. ARC INDUSTRIES, INC., Appellant.
• Court: Ohio Supreme Court

Page 146

47 Ohio St.2d 146

351 N.E.2d 113, 1 O.O.3d 86

GTE AUTOMATIC ELECTRIC, INC., Appellee, v. ARC INDUSTRIES, INC., Appellant.

No. 75-1011.

Supreme Court of Ohio.

July 21, 1976.

Syllabus by the Court

1. An order setting aside a default judgment pursuant to Civ.R. 55(B) is a final appealable order, as provided in R.C. 2505.02 (Price v. McCoy Sales & Service, 2 Ohio St.2d 131, 207 N.E.2d 236, followed.)

2. To prevail on a motion brought under Civ.R. 60(B), the movant must demonstrate that: (1) the party has a meritorious defense or claim to present if relief is granted; (2) the party is entitled to relief under one of the grounds stated in Civ.R. 60(B)(1) through (5); and (3) the motion is made within a reasonable time, and, where the grounds of relief are Civ.R. 60(B)(1), (2) or (3), not more than one year after the judgment, order or proceeding was entered or taken.

3. Where timely relief is sought from a default judgment and the movant has a meritorious defense, doubt, if any, should be resolved in favor of the motion to set aside the judgment so that cases may be decided on their merits.

4. As a general rule, the neglect of a party's attorney will be imputed to the party for the purposes of Civ.R. 60(B)(1). (Link v. Wabash R. R. Co., 370 U.S. 626, 82 S.Ct. 1386, 8 N.Ed.2d 734, followed.)

On November 30, 1973, appellee, GTE Automatic Electric, Inc. ('GTE'), filed suit against appellant, ARC Industries Inc. ('ARC'), based upon the failure of ARC to pay an account allegedly due GTE. ARC was duly served with the complaint, interrogatories and request for admissions on December 7, 1973. ARC failed to plead or otherwise defend, and, on January 10, 1974, GTE took a default judgment against ARC in the amount of $11,187.49.

GTE thereafter began proceedings in aid of execution. ARC was ordered to appear for a judgment debtor examination on February 15, 1974. There is no evidence in the record that ARC appeared as ordered. On May 6, 1974, an order was entered by the court attaching appellant's funds held by City National Bank and requiring the bank to apply the $7,501.90 it held to the judgment.

On May 14, 1974, ARC made a motion to vacate the default judgment. A hearing on the motion was held before a referee of the court on October 16, 1974.

At the hearing, it developed that ARC would, if relief were granted, introduce evidence tending to show that the goods underlying the account sued upon by GTE were purchased by Miller-Dobbs, Inc., not appellant, and that appellant had not assumed the liabilities of Miller-Dobbs, Inc. The president of ARC also testified with respect to his version of the above scenario. He testified that when he received the complaint and other papers, he turned them over to legal counsel. (That fact is denied by the attorney, who is not now associated with the case.) At that time counsel purportedly told him there was nothing to worry about, and he 'didn't.' It was not until well after the default judgment had been entered and shorty before GTE attached the bank account that the president again spoke to the attorney. The attorney then denied that he had been given the original papers. It was at this time that ARC terminated their relationship with the attorney.

The referee's report, relying upon Berea Bus Lines v. Seminatore (1969), 17 Ohio App.2d 31, 244 N.E.2d 527, and Antonopoulos v. Eisner (1972), 30 Ohio App.2d 187, 284 N.E.2d 194, found that the neglect of the attorney should not be imputed to ARC. The trial court adopted that report and vacated the default judgment.

The Court of Appeals rejected the rule adopted by the trial court and followed the federal rule that an attorney's conduct should be imputed to the client when the determination is made whether relief should be granted unde Civ.R. 60(B). The Court of Appeals reversed the judgment of the trial court and ordered the default judgment reinstated.

The cause is now before this court pursuant to the allowance of a motion to certify the record.

Zacks, Luper & Wolinetz and Frederick M. Luper, Columbus, for appellee.

Van Heyde, Zuper & Rothgeb and Robert L. Van Heyde, Columbus, for appellant.

C. WILLIAM O'NEILL, Chief Justice.

The question presented by this appeal is whether it was an abuse of discretion for the trial court to grant appellant's motion, under Civ.R. 60(B), to vacate the default judgment previously entered. Since this court finds that the trial court did abuse its discretion under the facts of this case, the judgment of the Court of Appeals must be affirmed.

Initially, however, the court must first determine that an order vacating a default judgment is a final order and, therefore, appealable. Section 3(B)(2), Article IV of the Ohio Constitution.

The general rule in the federal courts is that an order vacating a default judgment is not a final order. United States v. Agne (C.A.3, 1947), 161 F.2d 331; Stathatos v. Arnold Bernstein S. S. Corp. (C.A.2, 1953), 202 F.2d 525; 7 Moore's Federal Practice, Paragraph 60.30(3). See, also, Annotation, 8 A.L.R.3d 1272, for a summary of cases on the state level.

In the second paragraph of the syllabus in Chandler & Taylor Co. v. Southern Pacific Co. (1922), 104 Ohio St. 188, 135 N.E. 620, this court held:

'An order vecating a default judgment upon motion of the defendant, filed at the same term, but more than three days after its rendition, is not a final determination of the rights of the parties and is not reviewable unless the court abuses its discretion in making it.'

Although Chandler has not been expressly overruled by this court, much has changed since it was decided. Insofar as Chandler may have implied that an otherwise interlocutory order can be made final and appealable by an abuse of discretion in the making of that order, that notion was laid to rest in Klein v. Bendix-Westing-house Co. (1968), 13 Ohio St.2d 85, 234 N.E.2d 587. In addition, the constitutional provisions relating to the jurisdiction of the Court of Appeals, as well as the interpretations given those provisions by this court, have changed since Chandler was decided. Writing for a unanimous court in Klein, supra, Justice Paul W. Brown appropriately noted, at page 86, 234 N.E.2d at page 589, that '(o)nly since Price v. McCoy Sales & Service, Inc. ((1965), 2 Ohio St.2d 131, 207 N.E.2d 236) * * *, has section 2505.02, Revised Code, been an accurate legislative restatement of this court's definition of a final order.' Price represents the culmination of a long and difficult series of decisions in which this court attempted to define a final order in terms of the jurisdictional provisions of the Ohio Constitution. While difficulties still remain in this area, the present case can be resolved by looking to R.C. 2505.02.

R.C. 2505.02 defines a final order as:

'An order affecting a substantial right in an action which in effect determines the action and prevents a judgment, an order affecting a substantial right made in a special proceeding or upon a summary application in an action after judgment, or an order vacating or setting aside a judgment and ordering a new trial is a final order which may be reviewed, affirmed, modified, or reversed, with or without retrial.' (Emphasis added.)

Regardless of whatever else may be said of a default judgment, it is a judgment. It is as good as any other judgment. It is a final determination of the rights of the parties. Therefore, an order of the trial court pursuant to Civ.R. 60(B), setting aside a default judgment, is clearly within the express language of R.C. 2505.02. It is a final, appealable order.

Having found that the order of the trial court was a final order, we may now proceed to the question of whether the making of the order was an abuse of discretion.

Civ.R. 55(B) allows the trial court to set aside a default judgment in accordance with Civ.R. 60(B). Civ.R. 60(B) states, in part:

'On motion and upon such terms as are just, the court may relieve a party or his legal representative from a final judgment, order or proceeding for the following reasons: (1) mistake, inadvertence, surprise or excusable neglect; (2) newly discovered evidence which by due diligence could not have been discovered in time to move for a new trial under Rule 59(B); (3) fraud (whether heretofore denominated intrinsic or extrinsic), misrepresentation or other misconduct of an adverse party; (4) the judgment has been satisfied, released or discharged, or a prior judgment upon which it is based has been reversed or otherwise vacated, or it is no longer equitable that the judgment should have prospective application; or (5) any other reason justifying relief from the judgment. The motion shall be made within a reasonable time, and for reasons (1), (2) and (3) not more than one year after the judgment, order or proceeding was entered or taken. A motion under this subdivision (B) does not affect the finality of a judgment or suspend its operation.'

To prevail on his motion under Civ.R. 60(B), the movant must demonstrate that: (1) the party has a meritorious defense or claim to present if relief is granted; (2) the party is entitled to relief under one of the grounds stated in Civ.R. 60(B)(1) through (5); and (3) the motion is made within a reasonable time, and, where the grounds of relief are Civ.R. 60(B)(1), (2) or (3), not more than one year after the judgment, order or proceeding was entered or taken. Civ.R. 60(B); Universal Film Exchanges v. Lust (C.A.4, 1973), 479 F.2d 573; Adomeit v. Baltimore (1974), 39 Ohio App.2d 97, 316 N.E.2d 469; Brenner v. Shore (1973), 34 Ohio App.2d 209, 297 N.E.2d 550. The court agrees with the statement by Judge Sobeloff, in Lust, that these requirements are independent and in the conjuctive, not the disjunctive.

Appellant contends that where timely relief is sought from a default judgment and the movant has a meritorious defense, doubt, if any, should be resolved in favor of the motion to set aside the judgment so that...