Shotwell v. Cliff Hagan Ribeye Franchise, Inc.

• Decision Date: 29 May 1991
• Docket Number: No. 10S04-9105-CV-416,10S04-9105-CV-416
• Citation: 572 N.E.2d 487
• Parties: Dan F. SHOTWELL and Cliff Hagan Ribeye of Clarksville, Inc. d/b/a Cliff Hagan Ribeye, Appellants, (Plaintiffs Below), v. CLIFF HAGAN RIBEYE FRANCHISE, INC., and Cliff Hagan Ribeye, Inc., Appellees. (Defendants Below).
• Court: Indiana Supreme Court

Page 487

572 N.E.2d 487

Dan F. SHOTWELL and Cliff Hagan Ribeye of Clarksville, Inc.

d/b/a Cliff Hagan Ribeye, Appellants, (Plaintiffs Below), v. CLIFF HAGAN RIBEYE FRANCHISE, INC., and Cliff Hagan Ribeye,

Inc., Appellees. (Defendants Below).

No. 10S04-9105-CV-416.

Supreme Court of Indiana.

May 29, 1991.

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

David W. Crumbo, Brown, Todd & Heyburn, New Albany, for appellees.

ON PETITION TO TRANSFER

KRAHULIK, Justice.

Cliff Hagan's Ribeye Franchise, Inc., and Cliff Hagan Ribeye, Inc., ("Hagan defendants") seek transfer after the Court of Appeals reversed the trial court and ordered reinstatement of a default judgment which the trial court had set aside. Shotwell v. Cliff Hagan's Ribeye Franchise (1990), Ind.App., 553 N.E.2d 204. Because we conclude that service of process on the Hagan defendants did not comply with IND.CODE Sec. 23-3-3-1 (1982), we now grant transfer, vacate the opinion of the Court of Appeals, and affirm the trial court's setting aside of the default judgment. The following issues are raised:

1. Whether the trial court erred in granting the Hagan defendants' Motion for Relief from Judgement under IND. TRIAL RULE 60(B);

2. Whether the Hagan defendants were "doing business" in Indiana for purposes of the long arm statute; and

3. Whether the Hagan defendants were required to present a meritorious defense in order to have the default set aside.

The facts necessary for resolution of these issues follow. In 1986, plaintiffs Dan F. Shotwell and Cliff Hagan Ribeye of Clarksville, Inc. d/b/a Cliff Hagan Ribeye (collectively, Shotwell) filed suit against the Hagan defendants, both of which were located in Kentucky, for a declaratory judgment to void a franchise agreement, for damages, attorney fees, and costs. The Hagan defendants were foreign corporations neither licensed nor admitted to do business in Indiana. Service of process was attempted pursuant to IND.CODE Sec. 23-3-3-1, which provides a method for achieving service on corporations not licensed or admitted to do business in Indiana. In pertinent part the statute provides:

Provided, that notice of such service and a copy of the process, writ, notice or order are forthwith sent by registered mail, with return receipt requested, addressed to such foreign corporation at the principal office of such foreign corporation designated in the articles of incorporation of such foreign corporation as the same may appear in the proper office of the state under whose laws such corporation is incorporated where articles of incorporation are required originally to be filed under the laws of such state. Upon the return of such return receipt showing delivery and acceptance of such registered mail, or upon the return of such registered mail showing a refusal of the acceptance thereof by such foreign corporation, the secretary of state shall attach either the return receipt or such refused mail to the copy of the process, writ, notice, or order retained by him and mail the same to the clerk of the court....

Ind.Code Sec. 23-3-3-1 ¹ (Emphasis added) Accordingly, the summons and complaint were served on the Indiana secretary of state and were in turn forwarded via registered mail to the Hagan defendants' respective agents for service of process as identified in the Hagan defendants' annual reports filed with 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 U.S. Post Office. The Indiana Secretary of State filed affidavits of service reflecting each notation as required by IND.CODE Sec. 23-3-3-1.

Both Hagan defendants were listed in the Lexington telephone directory in 1986, and for some period of time before suit was filed, Shotwell had been sending checks to one or the other defendant. Furthermore, the envelope containing the summons directed to Cliff Hagan Ribeye Franchise, Inc., contained a street number that differed from the one shown in the records of the Kentucky Secretary of State's office. We also note that in 1981, Cliff Hagan Ribeye, Inc., attempted to change its corporate address on forms sent to the Kentucky Secretary of State's office but that a period of two years elapsed before the change appeared on the annual report form, and that the franchise attempted a similar change beginning in 1985 which was not reflected on the form until 1988. In addition, the annual report forms for 1985 through 1988 did not provide a space for indicating a change in the address of the registered agent.

Neither Hagan defendant filed an answer to the complaint; indeed, the parties agree that neither Hagan defendant ever received process and neither had actual knowledge of the existence of the lawsuit. A default judgment for $194,000 in damages and $787.50 in attorney fees, interest and costs was entered six weeks after the complaint was filed.

No attempt was made to execute on the judgment for twenty-two months. When the Hagan defendants were served in the action to collect the judgment, they promptly filed a motion for relief from judgment pursuant to T.R. 60. The trial court granted the motion and set aside the judgment pursuant to T.R. 60(B)(8).

I. Granting of Motion for Relief from Judgment

At the outset, we note that the decision of whether to grant relief under T.R. 60(B) is left to the equitable discretion of the trial court. We will not reweigh the evidence, and will reverse only for an abuse of such discretion. Hoag v. Jeffers (1928) 201 Ind. 249, 159 N.E. 753.

The statute pursuant to which service was attempted provides that a foreign corporation not authorized or licensed to do business in Indiana is deemed to have appointed the secretary of state as its agent for service of process and sets forth the method by which service is to be accomplished. One of the steps in the process required by the express terms of the statute is that the return receipt show "delivery and acceptance" or "refusal of acceptance" of the suit papers by the defendant. Here,...