McClurg v. Deaton
| Decision Date | 06 September 2011 |
| Docket Number | Opinion No. 27038 |
| Parties | Ann F. McClurg and Ann F. McClurg, as Personal Representative of the Estate of Stephen Andrew McClurg, Respondent, v. Harrell Wayne Deaton and New Prime, Inc., Petitioners. |
| Court | South Carolina Supreme Court |
ON WRIT OF CERTIORARI TO THE COURT OF APPEALS
Appeal from Greenville County
Edward W. Miller, Circuit Court Judge
AFFIRMED
C. Mitchell Brown, William C. Wood, Jr., A. Mattison Bogan, and Michael J. Anzelmo, all of Nelson Mullins Riley & Scarborough, of Columbia, and C. Stuart Mauney, Phillip E. Reeves, and Jennifer D. Eubanks, all of Gallivan, White & Boyd, of Greenville, and Samuel W. Outten and Sandi R. Wilson, both of Womble Carlyle Sandridge & Ride, of Greenville, for Petitioners.
Cynthia Barrier Patterson, of Columbia, and Donald R. Moorhead, of Greenville, for Respondent.
Duke R. Highfield, Brandt R. Horton, and Benjamin A. Traywick, all of Young Clement Rivers, of Charleston, for Amicus Curiae American Law Firm Association. Frank L. Eppes, of Eppes & Plumblee, of Greenville, for Amicus Curiae South Carolina Association for Justice. Robert D. Moseley, Jr., Kurt M. Rozelsky, and Matthew M. Staab, all of Smith Moore Leatherood, of Greenville, for Amicus Curiae SC Trucking Association and American Trucking et al.. William B. Darwin, Jr. and Nathaniel P. Mark, both of Holcombe Bomar, of Spartanburg, for Amicus Curiae SC Defense Trial Attorney's Association.
We granted certiorari to review a decision of the Court of Appeals which upheld the circuit court's denial of both petitioners' Rule 60(b), SCRCP, motions. McClurg v. Deaton, 380 S.C. 563, 671 S.E.2d 87 (Ct. App. 2008). We affirm.
The Court of Appeals rested its affirmance on issue preservation grounds, that is, the failure of the petitioners to argue to the circuit court that they had a meritorious defense.1 A meritorious defense is necessary in order for a judgment to be set aside under Rule 60(b). See Mitchell Supp. Co., Inc. v. Gaffney, 297 S.C. 160, 375 S.E.2d 321 (Ct. App. 1988). The Court of Appeals did not decide, nor do we, whether a meritorious defense as to damages alone and not as to liability is an adequate basis for the grant of Rule 60 relief. Moreover, we do not decide whether a party demonstrating a meritorious defense to the damages awarded in the default proceeding would be entitled to have the entire judgment set aside or merely the damages award.
CHIEF JUSTICE TOAL: I respectfully dissent. This case presents an unusual fact scenario where New Prime, Inc. and Deaton (collectively, Petitioners) challenge a default judgment—obtained, in my opinion, by Respondents' trickery and deception—by contesting damages, rather than contesting liability. The majority concludes the issue of whether the default judgment should be set aside is unpreserved for appellate review because a meritorious defense was neither raised to, nor ruled upon by the circuit court. I believe both Petitioners raised a meritorious defense in their original pleadings before the circuit court by noting the substantial discrepancy between the damages awarded upon default and the medical expenses incurred or the settlement offer advanced by the plaintiffs. The circuit court ruled on that issue, finding Petitioners did not make a meritorious defense. It is a question of first impression in this state whether a meritorious defense to a default judgment may relate to damages or whether it may only involve a defense to liability. That question was squarely before the court of appeals when the circuit court found Petitioners failed to raise a meritorious defense. As such, it should be weighed on this Court's scales.
Because the majority neglected to include an explanation of the facts in its affirmance, I include a recitation here. In this case, Petitioners appeal the decision of the court of appeals upholding the circuit court's denial of each of Petitioners' Rule 60(b), SCRCP, motions.
On August 5, 2002, Deaton was driving a truck for his employer, New Prime, when Deaton was involved in an accident with Respondent Ann McClurg. Zurich North American (Insurer) insured New Prime under a commercial trucker's general liability policy with a $2 million per accident deductible.
Insurer learned of the accident on August 6, 2002, and began an investigation. In September 2002, Insurer received a letter of representation from the lawyer (Lawyer) representing both Ann McClurg and her then-living husband Stephen McClurg. In October 2002, Deaton left New Prime's employment.
Insurer and Lawyer remained in contact, discussing injuries, medical treatments, and settlement negotiations. In April 2004, Insurer received a settlement package from Lawyer demanding $170,000 to settle all claims. On June 28, 2004, Lawyer sent Insurer a letter referencing "McClurg v. New Prime and Deaton," and stating that if Insurer did not respond by next week regarding the settlement offer, he would "file suit and serve the Defendant and send [Insurer] a courtesy copy of the pleadings." In October 2004, Lawyer sent Insurer another letter enclosing a draft complaint naming only Respondent Ann McClurg as plaintiff and only New Prime as defendant, alleging that New Prime was vicariously liable for Deaton's negligence, and New Prime was liable for the negligent hiring, retention, and training of Deaton. Later that month, Insurer contacted Lawyer who agreed to delay filing the suit. For the next eight months, until June 2005, Insurer and Lawyer exchanged settlement offers, but the parties could not reach an agreement. At no time during these exchanges did Lawyer indicate he intended to pursue an action solely against Deaton. In May 2005, Lawyer sent Insurer a new medical report, without mentioning that in April 2005 he had filed suit on behalf of both McClurgs against Deaton only.
Lawyer attempted to serve Deaton in April 2005 through the South Carolina Department of Motor Vehicles (SCDMV) pursuant to South Carolina Code section 15-9-350. That attempt at service was returned and marked as "insufficient address." Lawyer then hired a private investigator, who found an alternate address for Deaton in Texas, and in June 2005, the SCDMV sent the complaint to Deaton by certified mail. The return receipt was ostensibly signed by Deaton on June 27, 2005. Deaton denies ever receiving the Summons and Complaint. Deaton did not answer or otherwise appear, and the circuit court filed an order of default on August 1, 2005. Deaton failed to respond to notice of the damages hearing, and in September 2005, the court entered judgments totaling $800,000 against Deaton; $750,000 for Ann McClurg and $50,000 for Stephen McClurg.
On October 5, 2005, after the expiration of the statute of limitations, Insurer contacted Lawyer's office to check on the status of the settlement negotiations, but Lawyer's staff would not give Insurer any information. On October 7, 2005, Insurer received a copy of the Deaton default judgment from Lawyer. In the letter accompanying the copy of the default judgment, Lawyer requested payment from Insurer to satisfy the judgment against Deaton. This is the first notice Insurer and New Prime had of the suit brought against Deaton. On that same day, Deaton made a motion to set aside the default judgment under Rule 60(b)(1) and (b)(3), SCRCP. New Prime subsequently motioned to intervene and moved to set aside the default judgment under this rule, as well. The circuit court granted New Prime's motion to intervene, but denied both Deaton's and New Prime's Rule 60(b) motions. The circuit court subsequently denied the parties' motions for reconsideration under Rule 59(e), SCRCP.
On appeal, the court of appeals affirmed in a 2-1 decision, with then-Chief Judge Hearn dissenting. McClurg v. Deaton, 380 S.C. 563, 580, 671 S.E.2d 87, 96 (Ct. App. 2008). The denial of relief for Petitioners rested entirely on the determination that Petitioners failed to raise a meritorious defense when motioning to set aside the default judgment. Id. at 573, 671 S.E.2d at 93. On the merits, the court of appeals held that, as an intervening party to the action, New Prime was entitled to relief under Rule 60(b), SCRCP, if it satisfied one of the Rule's requirements.3 Id. at 573, 671 S.E.2d at 92–93. The court of appeals then found that, at a minimum, the required element of surprise existed. Id. at 573, 671 S.E.2d at 92. The court opined that Lawyer's actions would most likely satisfy the misrepresentation and misconduct element of Rule 60(b)(3), SCRCP, as well. Id. at 573, 671 S.E.2d at 92–93. However, the court declined to offer relief to Petitioners, determining that any meritorious defense that may have existed in the record was not raised to or ruled upon by the trial court. Id. Then-Chief Judge Hearn dissented with respect to that conclusion, stating she believed Petitioners raised a meritorious defense in the course of the pleadings. Id. at 580, 671 S.E.2d at 96. In short, I would adopt Judge Hearn's dissent.
Petitioners' request for rehearing en banc was denied by a vote of 5 in favor, and 4 opposed.4 This Court granted both Deaton's and New Prime's petitions for writs of certiorari.
Our standard of review in this case is deferential. 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). "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...
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