Res. Ltd. v. New Trinity Coal, Inc.

• Decision Date: 26 April 2022
• Docket Number: 21-0332
• Citation: 874 S.E.2d 309
• Parties: RESOURCES LIMITED, LLC, Defendant Below, Petitioner, v. NEW TRINITY COAL, INC., Plaintiff Below, Respondent.
• Court: West Virginia Supreme Court

874 S.E.2d 309

RESOURCES LIMITED, LLC, Defendant Below, Petitioner,

v.NEW TRINITY COAL, INC., Plaintiff Below, Respondent.

No. 21-0332

Supreme Court of Appeals of West Virginia.

Submitted: March 15, 2022

Filed: April 26, 2022

Jace H. Goins, Christopher S. Etheredge, Steptoe & Johnson PLLC, Charleston, West Virginia, Attorneys for the Petitioner

Kirk Lightner, Lightner Law Offices PLCC, Scott Depot, West Virginia, Attorney for the Respondent

Moats, Justice:

Petitioner Resources Limited, LLC ("Resources Limited") appeals from an order entered March 31, 2021, by the Circuit Court of Fayette County. The circuit court previously had entered a default judgment order against Resources Limited in favor of Respondent New Trinity Coal, Inc. ("New Trinity"). Immediately following the entry of the default judgment order, Resources Limited filed its answer and affirmative defenses and a motion pursuant to Rule 60(b) of the West Virginia Rules of Civil Procedure to set aside the default judgment. By its March 31, 2021 order, the circuit court denied the motion to set aside the default judgment. On appeal, Resources Limited asserts that the circuit court incorrectly applied the factors set out in Parsons v. Consolidated Gas Supply Corp. , 163 W. Va. 464, 256 S.E.2d 758 (1979), which will be more fully discussed infra , and failed to appropriately consider whether Resources Limited's conduct in failing to timely respond to the complaint was excusable.

Upon thorough review of the record, and upon careful consideration of the parties’ briefs and oral arguments and the relevant law, we agree with Resources Limited that the circuit court erred in denying its motion to set aside the default judgment. Accordingly, we reverse the circuit court's March 31, 2021 order denying Resources Limited's motion to set aside the default judgment and remand for further proceedings consistent with this opinion.

I.FACTUAL AND PROCEDURAL HISTORY

On February 12, 2021, New Trinity filed a complaint in the Circuit Court of Fayette County asserting claims of breach of contract and unjust enrichment against Resources Limited arising from a contract agreement between the parties. According to the complaint, Resources Limited and New Trinity entered a contract where Resources Limited agreed to mine coal on property owned by New Trinity in Fayette County, West Virginia. New Trinity asserted that at the time of filing the complaint, Resources Limited owed it $1,271,216.29 which contention it supported with an affidavit signed by New Trinity's chief financial officer. Additionally, New Trinity contended that it had "perfected a lien on [Resources Limited's] equipment to protect the substantial sums of money advanced to [Resources Limited] that had not been repaid in case the contract would ultimately be terminated."

Pursuant to the West Virginia Rules of Civil Procedure, New Trinity attached a civil case information statement to the complaint. The civil case information statement indicated that service was to be completed by the Secretary of State's Office and that Resources Limited would have thirty days from the date of such service to file its responsive pleading. According to New Trinity, Resources Limited received a copy of the complaint in three different ways: (1) by electronic mail on February 12, 2021; (2) by certified mail on February 17, 2021; and (3) by service on the Secretary of State's Office, perfected on February 22, 2021.

On March 23, 2021¹ , New Trinity filed a motion for default judgment pursuant to Rule 55 ² of the West Virginia Rules of Civil Procedure maintaining that it had served Resources Limited on February 17, 2021, via certified mail and again on February 22, 2021, via the Secretary of State's Office. New Trinity further asserted that as of March 23, 2021, Resources Limited had filed no responsive pleading and made no appearance in the matter. The very next day, on March 24, 2021, the circuit court granted the motion for default judgment. In its order, the circuit court directed the circuit clerk to enter an order awarding New Trinity "the sum certain set forth in [the c]omplaint" and directed the sheriff to seize mining equipment referenced in the complaint in which New Trinity claimed to have a secured financial interest. On the same day, the circuit court entered a separate order directing that New Trinity "be given immediate possession of the secured collateral" referenced in the complaint and, again, directing the sheriff to retrieve the collateral.

Shortly thereafter, on March 26, 2021, pursuant to Rule 60(b) of the West Virginia Rules of Civil Procedure, Resources Limited filed a motion to set aside the default judgment. Resources Limited argued that the civil case information statement filed by New Trinity along with its complaint specifically stated that service would be perfected through the Secretary of State's Office, and Resources Limited, therefore, "believed that [it] had been served on February 22, 2021." Additionally, counsel for Resources Limited stated that when it discussed this complaint with the president of Resources Limited, David Huffman, he indicated that "he had not been served personally and was not aware of receiving service of process through any other method." Furthermore, Resources Limited denied that its president had signed the return receipt for the certified mail containing a copy of the complaint. Resources Limited maintained that it had served its answer and affirmative defenses by certified mail on March 24, 2021.³ Finally, Resources Limited argued that it should be granted relief because (1) New Trinity would not be prejudiced by the continuation of the action; (2) several of the material facts alleged by New Trinity were disputed and meritorious defenses existed; (3) a judgment of $1.2 million is a significant interest at stake; (4) there was no intransigence; and (5) excusable neglect existed. New Trinity opposed the motion.

The circuit court conducted a hearing on the motion to set aside default judgment on March 30, 2021. During the hearing, the circuit court stated that New Trinity suffered "extreme" prejudice because Resources Limited had control and use of equipment that was secured by New Trinity. It also found "based upon all pleadings in this matter -- it appears that there are really no material issues of fact or meritorious defenses." The circuit court concluded that there was a significant interest in this matter. In addition, the circuit court decided that the failure to answer the complaint in a timely fashion was a stalling tactic and not for any valid reason.

The circuit court then summarily found that there was no evidence of excusable neglect.

Following the hearing, on March 31, 2021, the circuit court entered its order denying Resources Limited's motion to set aside the default judgment. In its order, the circuit court explained that there are five factors that the court can consider in setting aside a default judgment and concluded that New Trinity

ha[d] suffered an extreme prejudice by [Resources Limited's] actions and/or inactions in this matter. In support of this conclusion, the [c]ourt notes that [New Trinity] has a secured interest in the equipment owned (and still operated) by [Resources Limited]. Every day that [Resources Limited] is permitted to continue operating this equipment, and profiting from this work, [New Trinity] is prejudiced. Every day that this equipment is used, the value of said equipment diminishes. [New Trinity] has been owed substantial sums of money for almost two years now, and [Resources Limited] continues to operate its business to [New Trinity's] detriment.

Moreover, the circuit court ordered the "previously entered default judgment remain in place" and that Resources Limited "be forced to immediately idle its equipment, so [New Trinity] is not additionally financially damaged."

Subsequently, on April 14, 2021, New Trinity filed an emergency motion to enforce compliance with the circuit court's order denying the motion to set aside the default judgment. Through its motion, New Trinity asserted that it had spoken with counsel for Resources Limited several times "in an attempt to agree on a repayment plan whereby [New Trinity] would agree to not seize the equipment it has a lawful right to seize." New Trinity further argued that Resources Limited had failed to confirm that the equipment was idled and provide the physical location of each item of equipment. As a result, New Trinity requested the circuit court to order (1) Resources Limited's compliance with the default judgment order; (2) that Resources Limited confirm the equipment is idled; (3) that Resources Limited provide the specific location for all secured equipment; and (4) an award of pre-judgment interest, post-judgment interest, and attorney's fees. Two days later the circuit court held a hearing and granted the motion, directed Resources Limited to comply, and found that Resources Limited's actions/inactions had been "contumacious" throughout the proceeding.

Thereafter, on April 19, 2021, Resources Limited filed a Chapter 11 bankruptcy petition in the United States Bankruptcy Court for the Southern District of West Virginia. The same day, Resources Limited filed with the circuit court a suggestion of bankruptcy which notified the circuit court of the bankruptcy filing and suggested that the circuit court action had been stayed by the operation of Title 11 U.S.C. § 362. Resources Limited then filed the instant appeal from the circuit court's March 31, 2021 order denying its motion to set aside the default judgment. During the pendency of this appeal, on February 23, 2022, this Court received an order from the bankruptcy court indicating that this current appeal is exempted from the automatic stay.

II.STANDARD OF REVIEW

With respect to motions made pursuant to Rule 60(b) of the West Virginia Rules of Civil Procedure to set aside a default judgment rendered pursuant to Rule 55 of the West...