Insurance Co. of North America v. Sperry & Hutchison Co., 53483

Citation168 N.W.2d 753
Decision Date10 June 1969
Docket NumberNo. 53483,53483
PartiesINSURANCE COMPANY OF NORTH AMERICA, Appellant, v. SPERRY & HUTCHISON COMPANY, Appellee.
CourtUnited States State Supreme Court of Iowa

Swift & Swift, and Cosson, Christianson, Hohnbaum & George, Des Moines, for appellant.

Jones, Hoffmann & Davison, Des Moines, for appellee.

GARFIELD, Chief Justice.

This is an interlocutory appeal by plaintiff granted by us under Rule 332, Rules of Civil Procedure, from an order under Rule 236 R.C.P. setting aside a default judgment in plaintiff's favor. There is little, if any, dispute in the record facts pertinent to the appeal.

On August 13, 1968 plaintiff, Insurance Company of North America, filed its petition at law in the district court at Ottumwa against Sperry & Hutchison Company, herein called S & H, to recover $89,843.50 as subrogee of Baker Music & Appliance and the owner of the building in which it was located in Ottumwa, both referred to here as Baker, alleging defendant's employees negligently caused a fire in an adjoining building occupied by S & H which damaged the Baker store, building and business in the amount alleged; that claim for such amount was made by Baker against plaintiff and paid by it under its policy of insurance issued to Baker.

On August 21, 1968, original notice of the action with copy of the petition attached was served on S & H by delivering a true copy thereof to Harlan Thoma in Des Moines, assistant vice president of Prentice Hall Corporation System, Inc., process agents of S & H. The original notice with sworn proof of service was filed in the district court at Ottumwa on September 12, 1968. The notice required defendant to appear before such court within 20 days after service thereof.

Also on September 12 plaintiff's attorneys appeared before the district court at Ottumwa, defendant's default was entered for failure to appear or plead as required by law, plaintiff's proof was submitted to the court which found it was entitled to judgment as prayed and it was accordingly entered.

On September 23 S & H filed its motion pursuant to Rule 236 R.C.P. to set aside the judgment entry on the ground its appearance and defense were not timely presented by reason of mistake, inadvertence, excusable neglect and unavoidable casualty in that the original notice was temporarily misrouted through the regular channels of large business operation as evidenced by attached affidavit of Robert L. Martin and that defendant has a valid defense to plaintiff's alleged cause of action. The affidavit of one of defendant's attorneys bearing on the matter of defense was also incorporated in the motion by reference.

Mr. Martin's affidavit stated he is loss-claim manager for the Des Moines division of Home Insurance Company, herein called Home; he first became aware of the litigation in question on September 17; subsequent investigation revealed the default judgment entered on September 12; later investigation disclosed that through mistake and inadvertence of self-insured individuals basis insurance coverage in a carrier other than his employer, to-wit Aetna Casualty & Surety Co., and only a policy of 'Excess Liability Coverage' having been issued by Home, the matter was not promptly forwarded for appropriate appearance; the cause has now been referred to defendant's present attorneys in Des Moines for such further proceedings as the court permits.

The affidavit of one of defendant's attorneys attached to its motion to set aside the judgment stated he first learned on September 17 of the default judgment in Ottumwa and two days later obtained copies of the pleadings and judgment entry in the case; affiant's firm has been retained by Home, excess liability carrier for S & H; the firm has been provided with sufficient facts and information to evaluate plaintiff's claim; affiant firmly believes a valid defense exists to it; the affidavit is made in good faith and solely for the purpose of protecting the interests of S & H and to accord it opportunity to present such defense and pursue its day in court.

Plaintiff's resistance to defendant's motion above summarized denied much of the motion and attached affidavits, denied sufficiency of the matters therein stated as grounds specified in Rule 236 for setting aside the default and alleged the attorney's affidavit did not support a claim there was a defense to plaintiff's petition. Plaintiff asked that Robert L. Martin appear for cross-examination under R.C.P. 116 and section 622.90 Code 1966.

At the hearing on the motion to set aside the default Mr. Martin stated on cross-examination by plaintiff's counsel that his first knowledge of the litigation came from a phone call from one of his superiors in Home's New York office; before then he had never been called by S & H; affiant's superior advised him the lawsuit was in the superior's hands, had been routed through the Aetna company on the presumption that most other locations it is the primary base of our 'umbrella' coverage which normally includes the portion of claims in excess of $100,000; affiant had no conversation with Aetna but got this information as hearsay from Home's office; affiant did not feel there was any mistake on the part of Home; he did not know if Aetna made a mistake; he knows nothing about the insurance department of S & H or its manager nor as to whether they made a mistake; after he learned of the litigation affiant made no investigation through S & H and does not know what it did; he had some knowledge of where the delay occurred and why there was some confusion but couldn't put his finger on a specific thing the company did.

On examination by counsel for Home, Mr. Martin said he had no personal knowledge of what went on in New York; that was mere supposition on his part; he had no dealings with S & H.

Aside from reciting the procedural matters as to filing the petition in Ottumwa, service of original notice on process agents of S & H, entry of default judgment, filing the motion to set it aside, the resistance thereto, and examination of Robert L. Martin, the trial court found as facts it appears From defendant's memorandum brief that the original notice, first served in Des Moines on August 21, was sent to the S & H local office in Ottumwa, thence to its district manager (location not stated), thence to their New York office, thence internally in defendant's New York office to its insurance manager, thence mistakenly to the Aetna company which returned it, indicating lack of coverage, to defendant's insurance manager, thence to Home at a time concurrent with entry of the default judgment.

As conclusions of law the trial court held these alleged facts constituted good cause under R.C.P. 236, infra, for setting aside the default judgment. The court concluded sending the original notice to Aetna was under the mistaken belief it was the insurer which would defend the action and when it was determined otherwise the phone call was made to Home which was obligated to appear and defend for S & H. The court further indicated it seemed clear defendant intended to appear and defend.

The trial court also concluded the affidavit of defendant's attorney attached to the motion to set aside the judgment denied the asserted cause of the fire and was a sufficient showing of a meritorious defense.

I. So far as now pertinent, R.C.P. 236 provides: 'On motion and for good cause shown, * * * but not ex parte, the court my set aside a default or the judgment thereon, for mistake, inadvertence, surprise, excusable neglect or unavoidable casualty."

As Rule 236 indicates, it was defendant's burden to show or, as some of our decisions say, to plead and prove good cause which would support a finding of mistake, inadvertence, surprise, excusable neglect or unavoidable casualty. See Haynes v. Ruhoff, Iowa, 157 N.W.2d 914, 915; Hallett Construction Co. v. Iowa State Highway Comm., 258 Iowa 520, 530, 139 N.W.2d 421, 428 and citations; Hobbs a Martin Marietta Co., 257 Iowa 124, 130, 131 N.W.2d 772, 775--776; Edgar v. Armored Carrier Corp., 256 Iowa 700, 704, 128 N.W.2d 922, 924; Rule 344(f) 5 R.C.P.

The trial court's findings of fact in such a matter as this are binding upon us if supported by substantial evidence. We do not review the facts de novo as in equity matters. See Rule 344(f) 1; Edgar v. Armored Carrier Corp., supra, at pages 704, 707 of 256 Iowa, pages 924, 926 of 128 N.W.2d, and citation; Davis v. Glade, 257 Iowa 540, 543, 133 N.W.2d 683, 685.

We have held several times the trial court has a broad discretion in ruling on such a motion as this and we will not interfere with its order in the absence of a showing of abuse of such discretion. Davis v. Glade, supra, and citations. Also, we are more reluctant to interfere with the grant of such a motion than with its denial. ibid. See also as bearing on this by analogy R.C.P. 344(f) 4.

In apparent recognition of the views just expressed, plaintiff-appellant's two...

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