Protective Ins. Co. v. Steuber

• Decision Date: 14 December 1977
• Docket Number: No. 2-775A171,2-775A171
• Citation: 370 N.E.2d 406,175 Ind.App. 139
• Parties: PROTECTIVE INSURANCE COMPANY, Orville Wright, Sr. and Red Cab Company, Inc., Appellants (Defendants below), v. Michael E. STEUBER, Appellee (Plaintiff below).
• Court: Indiana Appellate Court

Page 406

370 N.E.2d 406

175 Ind.App. 139

PROTECTIVE INSURANCE COMPANY, Orville Wright, Sr. and Red

Cab Company, Inc., Appellants (Defendants below), v. Michael E. STEUBER, Appellee (Plaintiff below).

No. 2-775A171.

Court of Appeals of Indiana, First District.

Dec. 14, 1977.

Rex P. Killian, Ruckelshaus, Bobbitt & O'Connor, Indianapolis, for appellants.

William F. Evans, Sr., Indianapolis, for appellee.

LYBROOK, Judge.

This action arises out of a collision between an auto driven by appellee Michael Steuber and one of appellant Red Cab's vehicles operated by Orville Wright, Sr. Steuber filed a complaint on May 18, 1973, for personal injury and property damages. After a period of 11/2 years, during which time defendants-appellants Red Cab and Wright failed to answer, Steuber filed a motion for default judgment that was granted on October 8, 1974. Judgment was entered for plaintiff Steuber in the amount of $28,000.

Steuber subsequently filed a Motion for Proceedings Supplemental to Execution against appellant Protective Insurance Company in an effort to reach judgment debtor's (Red Cab's) insurer through garnishment proceedings. Red Cab Company was self-insured for $10,000, and Protective Insurance provided coverage for judgments in excess of $10,000 up to $300,000. Pursuant to these proceedings, the court ordered Protective to pay $18,000 to plaintiff Steuber (the difference between the $28,000 judgment and the $10,000 limit on Red Cab's policy).

Appellants then filed two separate appeals one from the original default judgment and one from the order in proceedings supplemental to execution; this court denied appellee's Motion to Dismiss each of the appeals, and granted a petition for consolidation on appeal. The case was transferred to the First District of this court to lessen the disparity of caseloads among the districts.

The following issues are presented for our review:

(1) Were the defendants required to file a Motion to Correct Errors directed to the trial court's overruling of their TR. 60(B) motion?

(2) Whether the default judgment was rendered against Orville Wright and Red Cab in violation of the three day notice requirement in Trial Rule 55(B)?

(3) Whether, in an appeal from proceedings supplemental to execution, the appealing party must file a Motion to Correct Errors in the trial court?

(4) Was the $28,000 award of a default judgment, without affording the defaulted parties a hearing on damages, contrary to law?

I.

Appellants seek to bring a direct appeal from a default judgment and denial of their Motion to Correct Errors. Appellee alleges that appellants failed to file a Motion to Correct Errors directed to the trial court's refusal to set aside the default judgment and therefore this court lacks jurisdiction to hear this case.

Appellants' counsel entered an appearance for defendant Wright and filed a brief on behalf of both defendants Red Cab and Wright in opposition to the Motion for Default Judgment on October 15, 1974. On November 8, 1974, defendants filed a Motion to Set Aside Judgment, and an affidavit in support of their Motion to Set Aside Judgment on November 21, 1974. A hearing was held on November 21, and the cause was taken under advisement.

On December 9, 1974, defendants filed their Motion to Correct Errors, although at that time the trial court had not yet ruled on the defendants' Motion to Set Aside Judgment. The trial court made the following entry on December 16, 1974:

"Through inadvertence, oral argument heard by the judge pro tem. Findings and judgment for plaintiff stands." ¹

Defendants' Motion to Correct Errors was overruled April 8, 1975.

Appellee asserts that the proper method of challenging a default judgment is to file a Motion to Set Aside under TR. 60(B), await the trial court's ruling on the TR. 60(B) motion, and if it is unfavorable, file a Motion to Correct Errors followed by an appeal if the Motion to Correct Errors is overruled. The section of the Indiana Trial Rules governing the vacation of a default judgment, TR. 55(C) provides:

"A judgment by default which has been entered may be set aside by the court for the grounds and in accordance with the provisions of Rule 60(B)."

Appellants argue that the failure to give the three-day notice to the defendants under TR. 55(B) and the lack of hearing in the trial court constitute a deprivation of the appellants' right to due process of law and a denial of their right to a fair trial. They assert that a direct appeal was warranted where the record reveals errors of law which do not fall within the provisions of TR. 60(B). Such an appeal would follow the filing of a Motion to Correct Errors without requiring the filing and denial of a TR. 60(B) Motion to Set Aside the default judgment as a condition precedent.

In discussing the proper method to appeal an adverse default judgment the First District of this court has previously adhered to the absolute requirement of filing both a Motion to Set Aside (TR. 60) and when it is overruled a Motion to Correct Errors (TR. 59(A)). See Yerkes v. Washington Manufacturing Co., Inc. (1975), Ind.App., 326 N.E.2d 629, relying on the Third District case, Northside Cab Co., Inc. v. Penman (1973), 156 Ind.App. 577, 297 N.E.2d 838. The other districts of this court have since disagreed with decisions imposing this requirement.

In the case of In re Marriage of Robbins (1976), Ind.App., 358 N.E.2d 153, the Third District addressed an argument by appellee that the Court of Appeals was without jurisdiction to review the appeal because the appellant had filed his Motion to Correct Errors before the trial court had ruled on appellant's Motion to Vacate Judgment. The appellee in Robbins contended, as Steuber does in the case at bar, that the denial of the Motion to Correct Errors constituted a denial of the TR. 60(B) motion, and that a second Motion to Correct Errors must be filed in order to give the Court of Appeals jurisdiction. The Third District held that TR. 59 and TR. 60(B) have the common overlapping purpose of calling errors, either in equity or law, to the attention of the trial court to avoid injustice. Specifically, the court held that TR. 59(A)(9) encompasses the additional equitable purposes of TR. 60(B) during the 60 day time period in TR. 59, and therefore a TR. 60 purpose stated in a motion should be treated as a TR. 59 motion if it is filed within 60 days after judgment. The court went on to hold that no further motion to correct errors is required for an appeal where the trial court does not change its judgment.

In Kelly v. Bank of Reynolds (1976), Ind.App., 358 N.E.2d 146, the Second District also questioned the inflexibility of the Yerkes decision. After tracing the development of TR. 60(B), Judge Sullivan in Kelly, held that when a default judgment has been entered against a party, and that party alleges that an error of law forms a basis of that judgment, the allegations may be presented via a TR. 59 Motion to Correct Errors, without resorting to TR. 60 Motion and denial.

While the First District of this court has previously adhered to the absolute requirement of filing both a Motion to Set Aside (TR. 60(B)) and, when it is overruled, the filing of a Motion to Correct Errors, as the only method of perfecting an appeal from a default judgment, we think that the better course, which has been adopted by the other districts of the Indiana Court of Appeals, allows an exception where there has been filed, within 60 days of entry of the default judgment, a Motion to Correct Errors directed at errors of law in the trial court's granting of a default judgment. To the extent that Yerkes and its predecessors contain language inconsistent with this rule, those decisions are hereby modified. ²

II.

Appellants' first allegation of error contends that they did not receive proper notice of Steuber's Motion for Default Judgment. Steuber certified that a copy of the Motion was served on counsel for the defendants on October 7, 1974. Default judgment was rendered against both defendant Red Cab and Orville Wright on October 9, 1974.

Indiana Rules of Procedure, Trial Rule 55 (A and B) (Default Judgment) reads:

"(A) Entry. When a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise comply with these rules and that fact is made to appear by affidavit or otherwise, the party may be defaulted.

(B) Default Judgment. In all cases the party entitled to a judgment by default shall apply to the court therefor; but no judgment by default shall be entered against a person known to be an infant or incompetent unless represented in the action by a general guardian, committee, conservator, or other such representative who has appeared therein. If the party against whom judgment by default is sought has appeared in the action, he (or, if appearing by a representative, his representative) shall be served with written notice of the application for judgment at least three (3) days prior to the hearing on such application. If, in order to enable the court to enter judgment or to carry it into effect, it is necessary to take an account or to determine the amount of damages or to establish the truth of any averment by evidence or to make an investigation of any other matter, the court may conduct such hearing or order such references as it deems necessary and proper and shall accord a right of trial by jury to the parties when and as required." (Emphasis added).

The three day notice requirement in TR. 55(B) (as well as Local Court Rule 5(B)) ³ was addressed by the Court of Appeals in Northside Cab Co., Inc. v. Penman (1973), 156 Ind.App. 577, 297 N.E.2d 838, at 841, and Hiatt v. Yergin (1972), 152 Ind.App. 497, 284 N.E.2d 834, 841.

In Hiatt, the court interpreted the notice requirements as follows:

"The effect of these two subsections of the rule (TR. 55(A) and (B)) is that, even if a party has failed to plead or otherwise comply with the...