McClurg v. Deaton
| Decision Date | 20 November 2008 |
| Docket Number | No. 4458.,4458. |
| Citation | 671 S.E.2d 87,380 S.C. 563 |
| Court | South Carolina Court of Appeals |
| Parties | Ann F. McCLURG and Steve McClurg, Respondents, v. Harrell Wayne DEATON, and New Prime, Inc., Appellants. |
Samuel W. Outten, William J. Watkins, Jr., C. Stuart Mauney, Phillip E. Reeves and Jennifer D. Eubanks, all of Greenville, for Appellants.
Donald R. Moorehead, of Greenville, and Cynthia B. Patterson, of Columbia, for Respondents.
Harrell Wayne Deaton and New Prime, Inc. appeal from an order of the trial court denying their motions to set aside a default judgment in favor of Ann F. and Steve McClurg in the amount of $800,000. We affirm.
Ann McClurg, along with her husband Steve, instituted this action for injuries Ann received as a passenger in a car involved in an August 5, 2002 motor vehicle accident with a truck owned by New Prime and driven by New Prime's employee, Deaton. New Prime was insured by Zurich North America under a commercial trucker's general liability policy containing a $2,000,000 deductible endorsement for liability claims for each accident. Zurich was notified of the accident almost immediately and began investigating the matter shortly thereafter.
In the following month of September 2002, Zurich received a letter of representation from the McClurgs' counsel, beginning a course of contact between Zurich and counsel regarding injuries, medical treatment and settlement negotiations. Deaton left the employment of New Prime in October 2002, a little over two months following the accident, and there was no record of any communication between Deaton and New Prime during this time of negotiation subsequent to Deaton's separation from employment. On April 23, 2004, Zurich received a proposed settlement package from counsel. On June 28, 2004, counsel sent Zurich a letter regarding "Ann D. McClurg and Steve McClurg v. New Prime and Harrell Wayne Deaton." The letter requested settlement within the next week and stated, "If I haven't heard from you by that time, I will file suit and serve the Defendant and send you a courtesy copy of the pleadings." On October 6, 2004, counsel sent Zurich another letter, enclosing a copy of a complaint he prepared in the matter and indicating his intent to "proceed to litigation" if the matter was not soon settled. The draft complaint named only Ann McClurg as a plaintiff and New Prime as a defendant, and alleged New Prime was vicariously liable for Deaton's actions and was also liable for its negligent hiring, retention, and training of Deaton. On October 18, 2004, Zurich contacted counsel, who agreed to delay filing suit while Zurich reviewed the settlement demand. Between November 2004 and June 2005, Zurich and counsel exchanged telephone messages in regard to settlement, but did not reach a final agreement on the matter.
Unbeknownst to Zurich and New Prime, counsel filed a summons and complaint on April 27, 2005, naming only Deaton as a defendant. The complaint was filed on behalf of Ann McClurg, for injuries sustained in the accident, and her husband Steve, for loss of consortium. On May 3, 2005, the South Carolina Department of Motor Vehicles (the Department) received a copy of the summons and complaint pursuant to South Carolina Code Ann. § 15-9-350 and, on that same date, sent a copy of the summons and complaint by certified mail to Deaton at the Texas address listed on the accident report, but it was later returned as "Insufficient Address." On June 27, 2005, the Department again received the summons and complaint and sent the summons and complaint to Deaton via certified mail, this time to a different address in Texas, found through the efforts of a private investigator hired by counsel. This time the return receipt indicated it was received by Deaton, as evidenced by signature. Deaton did not answer or otherwise appear, and an order of default was filed on August 1, 2005. Notice of a damages hearing was sent to Deaton at both Texas addresses, but Deaton again failed to respond or appear. In September 2005, judgment was entered against Deaton in favor of Ann McClurg in the amount of $750,000 and in favor of Steve McClurg in the amount of $50,000 for a total judgment of $800,000.
On October 5, 2005, Zurich contacted counsel's office to determine the status of the settlement negotiations. After counsel's staff would not divulge any information, Zurich contacted New Prime to confirm New Prime had not been served with a summons and complaint in the matter. On October 7, 2005, Zurich received by certified mail a copy of the default judgment entered against Deaton. After the services of several private investigators were engaged, Deaton was finally located on January 23, 2006. On that date, Deaton executed an affidavit denying he was served with a copy of the summons and complaint, or received notice of the entry of default or the default judgment hearing, and stating he did not notify New Prime or Zurich of the above because he never received notice. Thus, it appears undisputed that neither Zurich nor New Prime was aware a complaint had been filed in the matter until October 7, 2005 when Zurich received a copy of the default judgment entered against Deaton. Notably, on May 11, 2005, after the summons and complaint were already filed by counsel and sent by the Department to Deaton at the first address, counsel continued the path of negotiation with Zurich, sending Zurich an additional medical report concerning the underlying cause of action.
Deaton moved to set aside the default judgment pursuant to Rules 60(b)(1) and 60(b)(3) of the South Carolina Rules of Civil Procedure. New Prime filed a motion to intervene and likewise moved to set aside the judgment pursuant to Rules 60(b)(1) and 60(b)(3). The trial court granted New Prime's motion to intervene, but denied both New Prime's and Deaton's motions to set aside the default judgment. Both New Prime and Deaton made motions for reconsideration pursuant to Rule 59(e), SCRCP, which the trial judge denied with the exception of deleting some language from the order not at issue in this appeal. This appeal followed.
1. Did the trial court err in failing to recognize New Prime's status as a party and afford New Prime due process rights?
2. Did the trial court commit an abuse of discretion in denying New Prime relief from judgment based on surprise?
3. Did the trial court commit an abuse of discretion in denying New Prime relief from judgment based on misrepresentation and misconduct by Respondents' attorney?
1. Did the trial court err in failing to set aside the default judgment when it was procured based on fraud, misrepresentation, or other misconduct inasmuch as Respondents' counsel actively concealed the lawsuit so no defense would be entered?
2. Did the trial court err in failing to set aside the default judgment under Rule 60, SCRCP, when Deaton demonstrated that he was not properly served with the summons and complaint and that he did not receive notice of the hearing on unliquidated damages?
3. Should the default judgment be set aside because the actual judgment entered was incongruent with the damages alleged in the pleadings?
The decision to grant or deny a motion for relief from judgment lies within the sound discretion of the trial court and will not be disturbed on appeal absent an abuse of discretion. BB & T v. Taylor, 369 S.C. 548, 551, 633 S.E.2d 501, 502-03 (2006). Thus, our standard of review limits this court to determining whether the trial court abused its discretion. Id. "An abuse of discretion arises where the judge issuing the order was controlled by an error of law or where the order is based on factual conclusions that are without evidentiary support." Id. at 551, 633 S.E.2d at 503
New Prime contends the trial court erred in failing to recognize its status as a party to the action after the court granted its motion to intervene, and denying New Prime relief on this basis. We agree. Nonetheless, we find the order denying New Prime's motion to set aside judgment must be affirmed on other grounds.
New Prime presented evidence that, based upon a federally mandated MCS-90 Endorsement contained in the applicable insurance policy, any noncooperation/late notice defense which might have been available due to Deaton's failure to notify New Prime of the lawsuit could be completely eliminated, thereby leaving New Prime vulnerable to being responsible for the entire judgment. The trial court granted New Prime's motion to intervene, recognizing New Prime's large financial interest in the action and possible responsibility for paying the judgment. Despite this determination by the trial court, it partially denied New Prime's motion to set aside the default judgment finding, in regard to New Prime's Rule 60(b)(1) motion that New Prime was not a party to the action, and therefore the McClurgs had no legal duty to serve New Prime with the action against Deaton or notify New Prime of the default proceedings against Deaton. The court therefore determined the evidence did not support the relief from judgment based on mistake, inadvertence, surprise or excusable neglect. In regard to New Prime's Rule 60(b)(3) motion, the court found New Prime was not a party to the action and consequently had no legal duty to notify New Prime or Zurich of the lawsuit, and therefore New Prime could not make a Rule 60(b)(3) motion to be relieved from judgment based on fraud, misrepresentation, or other misconduct of an adverse party. We find the trial court erred in holding New Prime was not a party to the action and, because it was not legally entitled to notice or service, could not show entitlement to relief under Rules 60(b)(1) or (3).
Rule 60(b), SCRCP provides in pertinent part as follows:
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