Shotwell v. Cliff Hagan's Ribeye Franchise, Inc., 10A04-8905-CV-183

• Decision Date: 30 April 1990
• Docket Number: No. 10A04-8905-CV-183,10A04-8905-CV-183
• Citation: 553 N.E.2d 204
• Parties: Dan F. SHOTWELL and Cliff Hagan Ribeye of Clarksville, Inc. d/b/a Cliff Hagan Ribeye, Appellants (Plaintiffs Below), v. CLIFF HAGAN'S RIBEYE FRANCHISE, INC. and Cliff Hagan Ribeye, Inc., Appellees (Defendants Below).
• Court: Indiana Appellate Court

Page 204

553 N.E.2d 204

Dan F. SHOTWELL and Cliff Hagan Ribeye of Clarksville, Inc. d/b/a Cliff Hagan Ribeye, Appellants (Plaintiffs Below), v. CLIFF HAGAN'S RIBEYE FRANCHISE, INC. and Cliff Hagan Ribeye Inc., Appellees (Defendants Below).

No. 10A04-8905-CV-183.

Court of Appeals of Indiana Fourth District.

April 30, 1990.

Rehearing Denied Aug 3, 1990.

Anne Marie Sedwick, Sedwick & Sedwick, Jeffersonville, for appellants.

David W. Crumbo, Mary Ann Guenther, Christopher R. Fitzpatrick, Brown, Todd & Heyburn, New Albany, for appellees.

CONOVER, Judge.

Plaintiffs-Appellants Dan F. Shotwell and Cliff Hagan Ribeye of Clarksville, Inc. d/b/a Cliff Hagan Ribeye (Shotwell) appeal the Clark Superior Court II's order setting aside a $194,000 default judgment it had entered twenty-three months earlier against Defendants-Appellees Cliff Hagan's Ribeye Franchise, Inc. and Cliff Hagan Ribeye, Inc. (Hagan).

We reverse.

This appeal presents the following issues:

1. whether the trial court erred by granting Defendants' Motion for Relief from Judgment,

(a) because it was filed more than one year from the date the judgment was entered,

(b) by granting that motion on grounds specifically prohibited by Ind.Trial Rule 60(B)(8),

(c) determining that the judgment was void for lack of personal jurisdiction when Hagan was doing business in Indiana and had been properly and sufficiently served with process, and

2. whether Hagan presented a prima facie case establishing a meritorious defense to Shotwell's action.

In December of 1980, Shotwell purchased all the outstanding stock of Cliff Hagan Ribeye of Clarksville, Inc. from the two original incorporators. They had entered into a licensing agreement with Hagan in 1976. For some reason, the incorporators never formally assigned the Hagan licensing agreement to Shotwell, but Shotwell in fact paid $34,000 in franchise fees to Hagan after purchase of the stock.

In 1986, Shotwell filed a two count complaint against Hagan for declaratory judgment to void the franchise agreement, damages, attorney fees and costs under the Indiana Franchise Act. Process was served on the Indiana Secretary of State as resident agent for Hagan, even though Hagan was not registered to do business in Indiana. The day after service, the Indiana Secretary of State forwarded a summons and complaint to Hagan's respective agents for service of process as reflected in their annual reports to the Kentucky Secretary of State. These papers were returned to the Indiana Secretary of State marked "Return to Sender Forward Order Expired" and "Moved Not Forwardable" by the United States Post Office. The Indiana Secretary of State filed affidavits of service reflecting each notation.

Hagan did not file an answer to the complaint and a default judgment was entered on August 15, 1986, for $194,000 in damages together with $787.50 attorney fees, interest and costs of the action.

On July 13, 1988, Hagan filed a Motion for Relief from Judgment. That motion was heard in January 1989, at which time evidence was taken. At its close, the trial judge declared the default judgment void and set it aside, believing Ind.Trial Rule 60(B)(8) gave him the authority to do so.

Shotwell appeals.

Because issues 1(a) and (b) are related, we discuss them together.

Shotwell contends the court erroneously granted Hagan's Motion for Relief from Judgment on T.R. 60(B)(8) ¹ grounds. Shotwell maintains Hagan's motion, although framed in T.R. 60(B)(8) language, is actually based on T.R. 60(B)(1) and thus, it is time barred. We agree.

While it is clear a trial court has broad discretion to set aside defaults under T.R. 60(B)(1)-(4), such discretion is limited to a one year period following the entry of default judgment. Pounds v. Pharr (1978), 176 Ind.App. 641, 376 N.E.2d 1193, 1196. T.R. 60(B)(8) gives broad equitable powers to the trial court and imposes a time limit based only upon reasonableness. H & A, Inc. v. Gilmore (1977), 172 Ind.App. 10, 359 N.E.2d 259, 260. However, some extraordinary circumstance must be affirmatively demonstrated to come within the purview of T.R. 60(B)(8). Graham v. Schreifer (1984), Ind.App., 467 N.E.2d 800, 803. The burden is on the movant to establish the existence of grounds for T.R. 60(B) relief and he must additionally establish a meritorious defense to the judgment. Id., at 802. Where a motion to set aside a default judgment contains near classic allegations of mistake, surprise or excusable neglect, the one year limitation for relief from judgment cannot be avoided by framing the motion in T.R. 60(B)(8) terms. H & A, Inc., supra, 359 N.E.2d at 261.

Here, the trial court entered the default judgment in August 1986. Shotwell filed a complaint on the judgment in Kentucky, in April, 1988. Hagan then filed its Motion for Relief from Judgment in July, 1988, nearly two years after the entry of default. The trial court determined Hagan's neglect in responding for two years stemmed from a lack of actual notice of the judgment. However, the record reflects the reason underlying Hagan's lack of actual notice was its own neglect and failure to update its annual reports with the Kentucky Secretary of State. Therefore, Hagan's T.R. 60(B)(8) request for relief due to any reason justifying relief from the operation of judgment, other than those reasons set forth in T.R. 60(B) sub-paragraphs (1)-(4), is in reality a request for relief based on mistake, surprise, or excusable neglect, a T.R. 60(B)(1) request. Thus, the trial court was without discretion to grant the motion filed two years after the entry of default.

Shotwell contends the trial court erred if its determination to set aside the default judgment was based on Hagan's claim the judgment was void for lack of personal jurisdiction. The trial court did not address this issue in its judgment. Shotwell maintains Hagan's business in Indiana subjects it to in personam jurisdiction in Indiana courts. Further, Shotwell contends Hagan was sufficiently served with notice. We agree.

In Indiana, jurisdiction is presumed and need not be alleged under Ind.Trial Rule 8(A). Alberts v. Mack Trucks, Inc. (1989), Ind.App., 540 N.E.2d 1268, 1270, reh. denied. Ind.Trial Rule 4.4(A)(1) provides a nonresident organization submits to the jurisdiction of Indiana courts by doing any business in this state. To establish personal jurisdiction, the court must find, at a minimum, "some act by which the defendant purposely avails itself of the privilege of conducting activities within the forum state, thus invoking the benefits and protections of its laws." Omnisource Corp. v. Fortune Trading Co. (1989), Ind.App., 537 N.E.2d 43, 44, quoting Hanson v. Denckla (1958), 357 U.S. 235, 253, 78 S.Ct. 1228, 1240, 2 L.Ed.2d 1283, reh. denied, (1958), 358 U.S. 858, 79 S.Ct. 10, 3 L.Ed.2d 92. A due process inquiry into personal jurisdiction questions involving foreign corporations requires the following:

(1) The defendant must be properly subject to the personal jurisdiction of the court, International Shoe Co. v. Washington (1945) 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95; (2) The defendant must receive adequate notice of the suit, Mullane v. Central Hanover Bank & Trust Co. (1950) 339 U.S. 306, 70 S.Ct. 652, 94 L.Ed. 865.

Griese-Traylor Corporation v. Lemmons (1981), Ind.App., 424 N.E.2d 173, 176. The first prong is satisfied by the defendant's "doing any business" in the state. T.R. 4.4(A)(1); IND. CODE 23-3-3-1; ² Griese-Traylor, supra, at 180.

In Griese-Traylor, the court relied heavily on Judge Steckler's opinion in Green v. Robertshaw-Fulton Controls Company (1962) (S.D.Ind.) 204 F.Supp. 117, where he stated:

... Indiana has not adopted a narrow interpretation of the term 'doing business' as applied to the question of a foreign corporation's amenability to service of process in actions growing out of activities performed by corporate agents within the state.... The language 'engaging in any transaction or the doing of any business' in the Indiana statute (23-3-3-1) is as broad as constitutional authority will permit.

Griese-Traylor, supra, at 178-179. Relying on Judge Steckler's comments, the Griese-Traylor court stated:

... Furthermore, we have no reason to think that the phrase 'doing any business' as employed in T.R. 4(A)(1) should be any more narrowly construed in cases involving foreign corporations than the phrase as employed in Ind.Code 23-3-3-1 has been construed.

Griese-Traylor, supra, at 180.

An understanding of the statutory language, (t)he engaging in any transaction or the doing of any business is critical to our discussion. This court has defined the term transaction, albeit in discussions pertaining to counterclaims, on at least two occasions. While these definitions are not directly on point, they are instrumental to our discussion.

In Excelsior Clay Works v. DeCamp (1907), 40 Ind.App. 26, 80 N.E. 981, 983, the court relied on several definitions to conclude:

A transaction is 'the management or settlement of an affair,' Century Dict. 'That which is done,' Webster's Dict. 'Transacting or conducting any business; negotiation; management; a proceeding,' Worcester's Dict. ' "Transaction," as ordinarily employed, is understood to mean the doing or performing of some matter of business between two or more persons.'

In Middelkamp v. Hanewich (1977), 173 Ind.App. 571, 364 N.E.2d 1024, 1035, J. Staton defined transaction in the context of a counterclaim:

' "Transaction" is a word of flexible meaning. It may comprehend a series of many occurrences, depending not so much upon their connection as upon their logical relationship.' Moore v. N.Y. Cotton Exchange (1926), 270 U.S. 593, 610, 46 S.Ct. 367, 371, 70 L.Ed. 750, 757.

Further, Black's Law Dictionary, Revised Fourth Edition (1968), defines transaction as follows:

Transaction. Act of transacting or conducting any business; negotiation; management; proceeding; that which is done; an affair. Something which has taken...