Gulf Maintenance & Supply, Inc. v. Barnett Bank of Tallahassee, 88-1119

• Decision Date: 04 May 1989
• Docket Number: No. 88-1119,88-1119
• Citation: 543 So.2d 813,14 Fla. L. Weekly 1098
• Parties: 14 Fla. L. Weekly 1098 GULF MAINTENANCE & SUPPLY, INC., C.M. Mihalich and Henry H. Brewer, Appellants, v. BARNETT BANK OF TALLAHASSEE, Appellee.
• Court: Florida District Court of Appeals

Page 813

543 So.2d 813

14 Fla. L. Weekly 1098

GULF MAINTENANCE & SUPPLY, INC., C.M. Mihalich and Henry H. Brewer, Appellants, v. BARNETT BANK OF TALLAHASSEE, Appellee.

No. 88-1119.

District Court of Appeal of Florida First District.

May 4, 1989.

George E. Lewis II, Tallahassee, for appellants.

Ronald A. Mowrey, Tallahassee, for appellee.

ZEHMER, Judge.

This is an appeal from an order denying a motion seeking relief from a default judgment pursuant to rule 1.540, Fla.R.Civ.P. Appellants contend that the court erred in failing to set aside the default judgment because (1) the plaintiff failed to serve the application for default upon defendants after defendants had served plaintiff's counsel with a paper, in violation of rule 1.500(b), Fla.R.Civ.P.; (2) the final judgment was entered upon proof of unliquidated damages without notifying defendants of a trial thereon, in violation of rule 1.500(e) and 1.440(c); and (3) the court abused its discretion in view of the showing in defendants' motion of excusable neglect and meritorious defenses within the meaning of rules 1.500(d) and 1.540(b). We reverse upon the first two grounds and, therefore, do not consider the third.

On July 9, 1985, Barnett Bank of Tallahassee filed a complaint against Gulf Maintenance & Supply, Inc., C.M. Mihalich, Henry Brewer, and Robert L. Smith. The complaint alleged that Gulf had executed a promissory note covering an open line of credit up to the face amount of $100,000.00; that Mihalich, Brewer and Smith had personally guaranteed payment of this note; that Gulf was in default for failure to pay the note when demanded; and that the principal sum of $63,634.72 plus interest remained due and owing to Barnett Bank. The complaint demanded judgment for damages, interest, costs, and attorneys fees.

Gulf was served on July 24 by service on its registered agent, George Lewis. Mihalich was served on July 23. Brewer was served on August 15 by service on attorney Lewis at Brewer's request. ¹ Lewis undertook representation of these defendants in this case and called Charles Dodson, attorney for the bank, to advise him that the defendants had defenses and a counterclaim arising out of the matters alleged in the complaint and desired to discuss settlement. Following this discussion, Lewis sent Dodson a letter on August 13 confirming his representation of these defendants and Dodson's agreement to an extension of time for filing a response while Dodson evaluated certain information regarding the defenses and counterclaim. ² The letter offered the Bank a judgment against Gulf and the assistance of Mihalich and Brewer in marshaling the assets of Gulf that were pledged on the note if the Bank would release Mihalich and Brewer from their guarantees. On August 21, 1985 Dodson replied by letter to Lewis that the Bank wished to proceed against Mihalich and Brewer and had rejected Gulf's proposal included in the letter of August 13. Dodson's letter continued, "Accordingly, please serve a response to the Complaint on behalf of the Corporation, Mihalich and Brewer, at this time." (A 44). Lewis called Dodson to further discuss the matter, but was informed that Dodson was withdrawing as counsel and that Ronald A. Mowrey would take over representation of the Bank. Lewis then called Mowrey's office sometime prior to September 11 and discussed the case with an associate, David Russ; but Russ declined to comment on settlement possibilities, so Lewis asked that Mowrey call him. Mowrey did not do so.

On September 11 Mowrey's firm filed a notice of appearance in the pending case and served a copy on Lewis. At the same time Mowrey's firm also filed a notice of default with the clerk pursuant to rule 1.500(a), alleging that no paper had been served on the undersigned attorney, but did not serve a copy on Lewis or otherwise notify him that the Bank was proceeding to obtain a default. That same day the clerk entered a default against the defendants "for failure to serve or file any paper as required by law." (A. 5). On September 16 Lewis conferred by telephone with Mowrey concerning depositions of Mihalich and Brewer previously noticed by Dodson for September 24. Mowrey told Lewis that the depositions could be canceled, and stated that he would inquire further of the Bank about the offer of judgment and release of Mihalich and Brewer, but Mowrey made no mention of the default entered by the clerk.

The matter continued to linger with several other communications between Lewis and Mowrey, and in May 1986 Mowrey advised Lewis by letter that the Bank planned to sell at auction the secured inventory it had obtained from Gulf, but did not mention the default. The auction was held and the Bank realized $12,836.80 from the sale. Thereafter, on September 2, 1986, Mowrey filed a motion for final judgment and an affidavit for attorney's fees, and scheduled a final hearing or trial for September 29; but he did not serve or otherwise advise Lewis or the defendants of this motion and did not obtain an order setting trial pursuant to rules 1.500(e) and 1.440. An ex parte hearing was held on September 29 at which the Bank presented evidence concerning the amounts advanced on the note, payments received, and the proceeds recovered in the sale. The court entered final judgment on September 29 totaling $92,920.33, which included $87,148.47 as principal amount ($23,513.75 more than the amount alleged in the complaint), interest, costs, and attorney's fees. No copy of the final judgment was served on Lewis.

Defendants and Lewis assert that the first notice they had of this final judgment was in March 1987, when Mowrey served them with interrogatories in aid of execution pursuant to rule 1.560. Lewis and Mowrey again communicated further about settlement without success, and finally, just before the judgment was a year old, Lewis filed a motion for relief from judgment pursuant to rule 1.540(b), alleging the foregoing facts. The motion was denied and this appeal ensued.

Some preliminary observations regarding the purpose and function of defaults are appropriate. Nearly 50 years ago the Supreme Court of Florida commented:

The true purpose of the entry of a default is to speed the cause thereby preventing a dilatory or procrastinating defendant from impeding the plaintiff in the establishment of his claim. It is not procedure intended to furnish an advantage to the plaintiff so that a defense may be defeated or a judgment reached without the difficulty that arises from a contest by the defendant.

Coggin v. Barfield, 150 Fla. 551, 8 So.2d 9, 11 (1942). These comments remain valid today under current rule 1.500. The purpose of the rule is to speed the action toward conclusion on the merits where possible, not to expedite litigation by ex parte actions and surprise. See H. Trawick, Florida Practice and Procedure. § 25-2, 25-3 (1985). The entry of default is appropriate where a defendant does not intend to appear and defend the merits of the action or engages in dilatory practices in bad faith solely for purposes of hindrance and delay. On the other hand, default is not appropriate in cases where the plaintiff knows that a defendant is represented by counsel who intends to assert matters in defense of the cause of action. The default rule has been liberally construed in Florida to allow trial upon the merits where all parties appear rather than to encourage resolution of legal disputes by default. EGF Tampa Associates v. Edgar V. Bohlen, 532 So.2d 1318 (Fla. 2d DCA 1988); Reicheinbach v. Southeast Bank, N.A., 462 So.2d 611 (Fla. 3d DCA 1985); See H. Trawick, Florida Practice and Procedure, § 25-2 (1985).

To carry out these purposes, rule 1.500(a) allows entry of a default by the clerk where no paper has been served by a defendant in an action. The underlying premise for this provision is the notion that failure to appear or otherwise respond to the complaint indicates that a defendant does not intend to contest the case. But rule 1.500(b) requires service of notice of an application for default when "any paper" has been filed or served in the action and requires the court, rather than the clerk, to enter a default in these circumstances. This provision is premised on the notion that such paper indicates an intention by the defendant to defend on the merits and that due process considerations require such notice if the plaintiff intends to proceed and hold the defendant within the time constraints in the rules of procedure. The default procedure is not intended to discourage settlement discussions before an answer is filed, nor is it intended to allow a plaintiff to take undue advantage of a defendant who engages in settlement efforts. Florida courts have, therefore, liberally construed the term "any paper" to include a defendant's pro se letter sent to plaintiff and not filed with the court, an attorney's letter stating that he had not yet been retained, and even a letter drafted, signed, and mailed by a paralegal of a law firm. See EGF Tampa Associates v. Edgar V. Bohlen, 532 So.2d at 1321-2.

It follows that notice of an application for default should always be served when the plaintiff is aware that a defendant is being represented by counsel who has expressed an intention to defend on the merits. A default is a procedural matter within the control of the attorney, so plaintiff's counsel should contact the attorney known to be representing a defendant to determine whether the latter intends to proceed in the matter before causing a default to be entered. See H. Trawick, § 25-3. ³

In the instant case, the appealing defendants responded to the complaint through the August 13, 1985 letter from their attorney, Lewis. The Bank's lawyers knew at all times that Lewis was representing these defendants and intended to assert matters in defense of the action. Consequently, rule 1.500(b) required the Bank to serve Lewis with notice of the application for default and present it to the...