Kirtland v. Fort Morgan Authority Sewer Service, Inc.

• Decision Date: 01 April 1988
• Parties: Ronald KIRTLAND v. FORT MORGAN AUTHORITY SEWER SERVICE, INC. 86-1298.
• Court: Alabama Supreme Court

Page 600

524 So.2d 600

Ronald KIRTLAND v. FORT MORGAN AUTHORITY SEWER SERVICE, INC.

86-1298.

Supreme Court of Alabama.

April 1, 1988.

James W. May, Gulf Shores, for appellant.

Bayless E. Biles of Wilkins, Bankester & Biles, Bay Minette, for appellee.

HOUSTON, Justice.

Ronald Kirtland, the defendant, appeals from a denial of his motion to set aside a default judgment. This dispute arose when Fort Morgan Authority Sewer Service (FMASS) instituted a suit against Kirtland, claiming damages for breach of contract and for fraud. As a result of Kirtland's failure to appear during the week of trial, the trial court entered a default judgment against Kirtland and in favor of FMASS for $210,000 on its breach of contract claim. Thereafter, Kirtland filed a motion to set aside the default judgment, pursuant to Rule 55(c), Ala.R.Civ.P. The trial court denied his motion. The issue here is whether the trial court abused its discretion in denying Kirtland's motion to set aside the default judgment under Rule 55(c).

In resolving this issue, we discuss and analyze the degree of discretion a trial court is vested with under Rule 55(c) and, more importantly, we examine and elaborate on the approach a trial court must take when ruling on Rule 55(c) motions.

Facts

On October 30, 1985, FMASS filed a complaint against Kirtland, alleging breach of contract and fraud. FMASS sent the summons and complaint to Kirtland's two addresses in Gulf Shores, Alabama, via certified mail. Kirtland received and accepted the summons and complaint. Although the record does not contain the written contract, Kirtland had apparently agreed to purchase 100 sewer taps from FMASS at a cost of $210,000 on June 4, 1984. According to FMASS, Kirtland refused to pay the $210,000 for the sewer taps and, consequently, breached the contract.

On September 24, 1986, Kirtland, represented by L.P. Sutley, filed an answer and a counterclaim in which he argued that FMASS had misrepresented the true cost of the sewer taps and that he had contracted to purchase sewer taps in reliance on this misrepresentation. This, according to Kirtland, constituted fraud.

On November 10, 1986, after considering Sutley's motion to withdraw, the trial court withdrew his name as attorney of record for the defendant. Kirtland asserts in his brief that he received no notice of his attorney's withdrawal. However, we found an absence of conclusive evidence in the record proving Kirtland's knowledge of Sutley's withdrawal, or lack thereof, prior to the entry of default judgment. The record does substantiate Kirtland's claim that he received no notice from Sutley of the setting of the case for trial.

On December 15, 1986, the trial court issued an order setting the case for jury trial. On the document representing the trial court's order, no specific trial date was mentioned or stated in the blanks set out for such a purpose; but, beneath the main body of the trial judge's order were the handwritten words: "This is a jury case--will be set the week of civil jury--January 12, 1987." The order shows that copies of the order were mailed on December 17, 1986, to the same two addresses to which the summons and complaint were mailed--Post Office Box 818, Gulf Shores, Alabama, and 1615 Old Highway, Gulf Shores, Alabama. As mentioned earlier, the record indicates that Kirtland did receive the summons and complaint via certified mail at these addresses. On January 12, 1987, Kirtland failed to appear. On January 15, 1987, in Kirtland's absence, the jury found for the plaintiff, FMASS, and assessed its damages at $210,000, and the trial judge entered a judgment accordingly.

On February 6, 1987, Kirtland learned of the default judgment entered against him, and, on February 10, 1987, he filed a motion to set aside the default judgment, pursuant to Rule 55(c), Ala.R.Civ.P., arguing that he had received no notice of the trial date and that he was entitled to raise the defenses of res judicata, failure of consideration, and fraud. In his supporting affidavit, Kirtland stated that he had received no notice of the trial date either from his attorney or from the clerk's office, that the addresses listed on the clerk's file were incorrect, and, therefore, that notice to those addresses would not have apprised him of the upcoming trial. Thus, he argued that the failure of the clerk's office or his attorney to provide him with notice resulted in the deprivation of his right to present defenses. Because the trial court failed to dispose of his post-judgment motion within 90 days, the motion was automatically denied pursuant to Rule 59.1, Ala.R.Civ.P. Kirtland appeals from this denial.

Standard of Review and Issue

The applicable standard of review in appeals stemming from a trial court's granting or denying a motion to set aside a default judgment is whether the trial court's decision constituted an abuse of discretion. Johnson v. Moore, 514 So.2d 1343 (Ala.1987); Lightner Investigators, Inc. v. Goodwin, 447 So.2d 679 (Ala.1984); Roberts v. Wettlin, 431 So.2d 524 (Ala.1983). Thus, the question sub judice is whether the trial court abused its discretion in denying Kirtland's motion to set aside the default judgment.

Prior to resolving this question, we must determine whether Rule 60(b), Ala.R.Civ.P., or Rule 55(c) applies. Because the trial judge did not rule on Kirtland's Rule 55(c) motion, we must consider the motion automatically denied by operation of law. Rule 59.1. Prior to the 1984 amendment, Rule 55(c), as originally promulgated, provided: "In its discretion, the court may set aside an entry of default and the court may set aside a judgment by default within 30 days thereafter." We interpreted this language to mean that when a trial court chose not to rule on a motion to set aside a default judgment within the prescribed 30-day period following the date of the default judgment, then Rule 60(b) displaced Rule 55(c) as the sole means of relief. Comments to Rule 55, Ala.R.Civ.P.; Elliott v. Stephens, 399 So.2d 240, 242 (Ala.1981), overruled on other grounds, Ex parte Illinois Central Gulf R.R., 514 So.2d 1283 (Ala.1987). This rule was first enunciated in Wiggins v. Tuscaloosa Warehouse Groceries, Inc., 396 So.2d 91 (Ala.1981), wherein the Court treated a timely filed Rule 55(c) motion as a Rule 60(b) motion because the trial judge did not exercise his discretion within 30 days after entry of the default judgment. In reaching this decision, the Wiggins Court stated:

"Under Rule 55(c), ARCP, a trial court, in its discretion, may set aside a judgment by default within 30 days after its rendition. After 30 days has passed since the entry of the default judgment, Rule 60, ARCP, becomes available to a party who has had a default judgment entered against him. Under Rule 55(c), the defaulting party must have the trial court act to set aside the default within 30 days after the rendition of the judgment. Merely filing a motion to set aside the default without any action by the trial court within the 30-day period is not sufficient." (Emphasis in Wiggins ).

Id. at 92.

The 1984 amendments to Rule 55(c) and Rule 59.1 abrogated our case law holding that a timely filed Rule 55(c) motion converts into a Rule 60(b) motion when the trial court allows the 30-day period to expire without making a ruling. ¹ Now, a trial court, in its discretion, may set aside a default judgment on its own motion within 30 days after entry of the judgment or beyond the 30-day period on a party's motion filed not later than 30 days after the entry of the judgment; but, if it fails to rule on the motion within the 90-day period, the motion is deemed to be denied. Rule 55(c) and comments; Rule 59.1. Prior to 1984, Rule 55(c) limited a trial judge to a 30-day period within which to exercise his discretion. But, with the 1984 amendments, a trial judge's discretionary power continues throughout the 90-day period after entry of the default judgment, until denial of the Rule 55(c) motion by operation of law. As a result of these amendments, the stringent requirements of Rule 60(b) no longer supplant Rule 55(c) in the event the trial court fails to make a ruling. Therefore, Kirtland's motion remains a Rule 55(c) motion even though the trial judge chose not to exercise his discretion. See Ex Parte Illinois Central Gulf R.R., 514 So.2d 1283 (Ala.1987).

I. Discretionary Authority Under Rule 55(c)

Resolving questions of abuse of discretion requires an understanding of the extent of discretionary authority with which a trial judge is vested. By its plain language, Rule 55(c) confers broad discretionary authority upon trial judges. This discretion, however, is not boundless. Rule 1(c), Ala.R.Civ.P., states: "These rules shall be construed to secure the just, speedy and inexpensive determination of every action." Thus, Rule 1 mandates that trial courts construe Rule 55(c) to effectuate an expeditious, efficient, and just resolution of litigation. This requires a trial court to balance two competing policy interests associated with default judgments: 1) the need to promote judicial economy and 2) the need to preserve an individual's right to defend on the merits. See C. Wright, A. Miller & M. Kane, Federal Practice and Procedure, Civil, § 2693 (2d ed. 1983). Application of the default judgment rule can easily lead to a polarization of these two objectives. Denying a motion to set aside a default judgment would further the goal of securing a "speedy" and "inexpensive" resolution of the action, yet would potentially deprive a litigant of an opportunity to present a viable defense. Conversely, granting a motion to set aside a default judgment would advance the cause of individual justice by insuring an adjudication on the merits, but would, in view of the concurrent delay and additional costs, impair the objective of promoting judicial efficiency. Reconciling these two opposing interests, therefore, presents a difficult task; and, for this reason, ...