Ohio Valley Radiology Associates, Inc. v. Ohio Valley Hosp. Ass'n

• Decision Date: 24 December 1986
• Docket Number: No. 86-708,86-708
• Citation: 28 OBR 216,28 Ohio St.3d 118,502 N.E.2d 599
• Parties: , 28 O.B.R. 216 OHIO VALLEY RADIOLOGY ASSOCIATES, INC. et al., Appellees, v. OHIO VALLEY HOSPITAL ASSOCIATION et al., Appellants.
• Court: Ohio Supreme Court

Page 118

28 Ohio St.3d 118

502 N.E.2d 599, 28 O.B.R. 216

OHIO VALLEY RADIOLOGY ASSOCIATES, INC. et al., Appellees, v. OHIO VALLEY HOSPITAL ASSOCIATION et al., Appellants.

No. 86-708.

Supreme Court of Ohio.

Dec. 24, 1986.

This case involves several claims which arose out of the operation by the parties of the radiology department of the defendant Ohio Valley Hospital Association (hereinafter "the hospital"). Plaintiff-appellee Herbert Friedman, M.D. is the sole shareholder of the co-plaintiff-appellee Ohio Valley Radiology Associates, Inc. (hereinafter "Radiology Associates"), an Ohio professional corporation. In June 1978, the plaintiffs entered into a contract with the defendant hospital whereby Radiology Associates was to provide radiological diagnosis and treatment for the hospital.

Radiology Associates then entered into employment contracts with the four physician defendants: Drs. Hueng J. Yoo, Paul B. Lattin, Belen Vargas and Young Lee. For reasons not apparent from the record, the hospital became dissatisfied with Radiology Associates' performance under the contract and, on August 27, 1980, the hospital advised Radiology Associates that it would not renew the contract when it expired on June 30, 1981.

The plaintiffs thereafter brought suit against the hospital and the four physicians alleging that they had tortiously conspired to terminate the contract by "collusive[ly] * * * forcing a deterioration of radiology services at the Defendant Hospital with the ultimate purpose being to provide Defendant Hospital with grounds to effect a termination of the * * * [c]ontract."

The defendants-physicians answered and counterclaimed, alleging, inter alia, that Dr. Friedman had breached their employment contracts and had failed to return certain amounts withheld from the physicians' salaries for pension and retirement programs. The plaintiffs Friedman and Radiology Associates filed a timely reply to these counterclaims.

The complaint was filed on December 3, 1981. Sometime thereafter, Dr. Friedman moved to Boca Raton, Florida. On October 26, 1983, the plaintiffs' original attorney withdrew from the case with leave of court, effectively leaving the plaintiffs without counsel of record. In its October 26, 1983 journal entry allowing the withdrawal of counsel, the court specifically ordered that the plaintiffs "will be henceforth notified directly at 7585 Martinique Boulevard, Boca Raton, FL 33433." This order implicitly recognized that after the withdrawal of counsel, the plaintiffs were not represented by any attorney.

Despite this fact, on August 24, 1984, the trial judge sent notice of a February 21, 1985 trial date to John R. Spon, Jr., a local attorney, in the mistaken belief that Spon represented the plaintiffs. Somehow the court came to believe that Spon, who had represented Dr. Friedman in other matters, also represented him in this case. In fact, Spon was never an attorney of record for the plaintiffs. A handwritten notation appears on the letter which indicates that Spon called the court to say that he did not represent the plaintiffs in that case. Despite this notation, the court made no further effort to notify the plaintiffs at their Florida address.

Before trial, all defendants filed separate motions for summary judgment on the plaintiffs' original claims against them. Plaintiffs failed to respond to any of these motions, and all such motions were granted. On February 21, 1985, the defendants-physicians appeared for trial. The plaintiffs did not appear, nor did any counsel on their behalf. The defendants waived a jury and proceeded to conduct an ex parte trial on their counterclaims against the plaintiffs. The defendants presented testimony from five witnesses and introduced twenty-seven exhibits in the course of a two-and-one-quarter-hour trial. On April 10, 1985, the court issued findings of fact and entered judgment for defendants on each of the counterclaims, awarding compensatory damages, punitive damages, and attorney fees to each of the counterclaiming physicians. Thereafter, the plaintiffs-appellees retained new counsel who promptly filed a notice of appeal. No attempt was made to vacate the judgments obtained by counterclaimants below.

The court of appeals reversed and remanded on the grounds that the judgment entered by the trial court was a default judgment, and that consequently it was entered in error due to the fact that the plaintiffs had not been served notice of the application for default judgment pursuant to Civ.R. 55(A). Finding its judgment to be in conflict with that of the Court of Appeals for Summit County in Garrison Carpet Mills v. Lenest, Inc. (1979), 65 Ohio App.2d 251, 417 N.E.2d 1277 , the court certified the record of the case to this court for review and final determination.

Michael F. Colley and Michael R. Thomas, Columbus, for appellees.

Stern, Stern & Stern Co., L.P.A., and Gary M. Stern, Steubenville, for appellant Paul B. Lattin, D.O.

Jeffrey Orr Brown, Steubenville, for appellant Belen Vargas, M.D. and Young Lee, M.D.

Adrian Hershey, Steubenville, for appellant Hueng J. Yoo, M.D.

PER CURIAM.

I

Under Civ.R. 55, when a party defending a claim has "failed to plead or otherwise defend," the court may, upon motion, enter a default judgment on behalf of the party asserting the claim. Civ.R. 55(A) and (C). If the defending party has failed to appear in the action, a default judgment may be entered without notice. If, however, the defending party has appeared in the action, the trial court must, by virtue of Civ.R. 55(A), afford that party seven days' notice of the hearing on the motion for default judgment before entering judgment.

The question certified to this court is whether the failure to appear at trial after having filed a responsive pleading constitutes a default within the meaning of Civ.R. 55(A), thereby requiring the trial court to afford the absent party seven days' written notice of the motion for default.

The judgment of the court of appeals in this case which reversed the judgment of the trial court did so on the theory that the judgment entered in favor of the counterclaimants was a default judgment within the meaning of Civ.R. 55(A), and that, therefore, the trial judge erred in not notifying the plaintiffs of the motion as required by Civ.R. 55(A), and in proceeding with an ex parte trial. As the court of appeals stated below:

" * * * When the trial court decided to proceed, even though the adversary parties (the appellants) were absent, it was * * * obvious from the record that this was not a trial in the true sense of the adversarial term. Legally and pursuant to civil procedure and statutory definition, the court was proceeding to grant a default judgment. Civ.R. 55(A) requires service of an application for default judgment upon the party against whom that judgment is sought if he has appeared in the action. A default judgment entered without such service is invalid. Ries Flooring Co. v. Dileno Construction Co. (1977), 53 Ohio App.2d 255 . * * * "

This statement reflects a basic misunderstanding of the concept of default, which led the court of appeals to improperly apply Civ.R. 55(A) to the trial proceedings in this case. Default, under both pre-Civil Rule decisions and under Civ.R. 55(A), is a clearly defined concept. A default judgment is a judgment entered against a defendant who has failed to timely plead in response to an affirmative pleading. McCabe v. Tom (1929), 35 Ohio App. 73, 171 N.E. 868. As stated by the court in Reese v. Proppe (1981), 3 Ohio App.3d 103, 105, 443 N.E.2d 992 "[a] default by a defendant * * * arises only when the defendant has failed to contest the allegations raised in the complaint and it is thus proper to render a default judgment against the defendant as liability has been admitted or 'confessed' by the omission of statements refuting the plaintiff's claims. * * * " It is only when the party against whom a claim is sought fails to contest the opposing party's allegations by either pleading or "otherwise defend[ing]" that a default arises. This rule applies to original claims as well as to counterclaims (Civ.R. 55[C] ), and is logically consistent with the general rule of pleading contained in Civ.R. 8(D), which reads in part that "[a]verments in a pleading to which a responsive pleading is required * * * are admitted when not denied in the responsive pleading."

Because a default under Civ.R. 55(A) only applies to those uncontested cases where one party has "failed to plead or otherwise defend," the notice requirements of Civ.R. 55(A) have generally been held inapplicable to cases in which a defending party who has previously pleaded later fails to appear for a trial or pretrial conference. The leading case in this regard is Coulas v. Smith (1964), 96 Ariz. 325, 395 P.2d 527, which is cited approvingly in the Staff Notes to Civ.R. 55. In Coulas, the Arizona Supreme Court was faced with the issue of whether a judgment entered against a defendant who failed to appear at trial after answering the complaint was a "default judgment" within the meaning of Arizona's Civ.R. 55(a), which is substantially similar to Ohio's Civ.R. 55(A). Sitting en banc the Arizona court held at 328 that the judgment could not be a default judgment since the case was at issue, the defendant having filed an answer and counterclaim.

This rule was also followed by the Court of Appeals for the Fifth Circuit in Bass v. Hoagland (C.A.5, 1949), 172 F.2d 205, certiorari denied (1949), 338 U.S. 816, 70 S.Ct. 57, 94 L.Ed. 494. In Bass, the court, in holding that a failure to appear at trial is not a default within Fed.R.Civ.P. 55(a), stated at 210: " * * * When [the defendant] Bass by his attorney filed a denial of the plaintiff's case neither the clerk nor the judge could enter a default against him. The burden of proof was put on the plaintiff in any trial. When neither Bass nor his attorney appeared at the trial, no...