Smith v. Johnston, CV-155

Docket NºNo. 49S05-9902-CV-141
Citation711 N.E.2d 1259
Case DateMay 27, 1999
CourtSupreme Court of Indiana

711 N.E.2d 1259 (Ind. 1999)
RAY C. SMITH, III, M.D., AND SMITH SURGICAL GROUP, APPELLANTS (DEFENDANT BELOW, )
v.
DONALD JAMES JOHNSTON, HUSBAND AND EXECUTOR OF THE ESTATE OF BEVERLY INDIANA COURT OF APPEALS JOANNE JOHNSTON, DECEASED, CAUSE NO. 49A05-9704-CV-155 APPELLEE (PLAINTIFF BELOW. )
Cause No. 49S05-9902-CV-141
May 27, 1999
Indiana Supreme Court

APPEAL FROM THE MARION SUPERIOR COURT The Honorable Gerald S. Zore, Judge Cause No. 49D07-9601-CT-0016

Attorneys For Appellants Sandra Boyd Williams Todd J. Kaiser Mary Ruth Feldhake Indianapolis, Indiana

Attorneys For Amicus Curiae Defense Trial Counsel of Indiana Leonard E. Eilbacher James P. Fenton Fort Wayne, Indiana James D. Johnson Evansville, Indiana

Attorney For Appellee Karen B. Neiswinger Indianapolis, Indiana

ON PETITION TO TRANSFER

The opinion of the court was delivered by: Boehm, Justice.

We hold that a default judgment must be set aside under Trial Rule 60(B)(3) for misconduct where the plaintiff's attorney filed suit and pursued the default judgment without notifying the attorneys whom she had been advised in writing were representing the defendant in the matter.

Factual and Procedural Background

Donald Johnston filed a proposed complaint with the Indiana Department of Insurance against Dr. Ray C. Smith, III, and Smith Surgical Group 1 for medical malpractice in the treatment of his wife Beverly Johnston. 2 Throughout the panel proceedings Johnston was represented by Karen Neiswinger and Smith and his group were represented by Locke Reynolds Boyd & Weisell. In November 1995, the medical review panel unanimously found that Smith failed to comply with appropriate standards of care.

Soon after the panel report, Neiswinger sent a letter to Locke Reynolds demanding the policy limits in settlement. After a month passed with no response to Neiswinger's letter, Johnston filed suit against Smith and Smith Surgical Group in the Marion Superior Court. When Neiswinger returned from the courthouse after filing the suit, she found in her mail a letter from Locke Reynolds rejecting her settlement demand.

The relevant facts are not in dispute. Smith and Smith Surgical were served with the complaint by certified mail on January 11, 1996, at their place of business. Cindy Smith, a scrub nurse, signed for the summonses. No appearance was filed on behalf of Smith. Johnston moved for a default judgment on February 20, 1996, approximately six weeks after filing the complaint. Neiswinger had made no effort at any time after sending her settlement demand to communicate with Locke Reynolds. In a sworn affidavit to the trial court, she stated that:

"I certify that no pleading has been delivered to Plaintiffs or to their counsel by the Defendants or any attorney appearing for Defendants, nor to the knowledge of the undersigned has any attorney entered an appearance since the filling of this cause, nor has any attorney contacted undersigned regarding entering their appearance on behalf of Defendants in this case since the filing of this cause."

The court granted a default judgment on liability one day later and set a hearing on damages for March 22, 1996, thirty days later. Judgment was entered on the day of the damages hearing in the amount of $750,000 and costs of $2,407. 3 The judgment was served on Smith, but not Locke Reynolds.

Six days after the $750,000 judgment was entered, Locke Reynolds entered an appearance and filed a notice of intent to petition to set aside the default judgment. Smith moved to set aside the default judgment under Trial Rule 60(B)(1) for excusable neglect based on a "breakdown in communication" and under Trial Rule 60(B)(3) for misconduct by Johnston's attorney. Smith contended that Neiswinger was obligated to provide a copy of the complaint and subsequent papers to Smith's attorneys when she knew Smith was represented by counsel. Smith also alleged a meritorious defense as required in seeking to set aside a default judgment. The trial court, relying on Bonaventura v. Leach, 670 N.E.2d 123 (Ind. Ct. App. 1996), denied Smith's motion to set aside. Smith appealed the denial of his motion to set aside the judgment, the Court of Appeals affirmed, and we granted Smith's petition to transfer.

We agree that the trial court's ruling was consistent with applicable precedent, including the case relied on by the trial court in its order. We also agree that the trial court was within its discretion to conclude that Smith's failure to read his mail is not excusable neglect under Rule 60(B)(1). However, we conclude that the overriding considerations of confidence in our judicial system and the interest of resolving disputes on their merits preclude an attorney from inviting a default judgment without notice to an opposing attorney where the opposing party has advised the attorney in writing of the representation in the matter. Accordingly, we hold that a default judgment obtained without communication to the defaulted party's attorney must be set aside where it is clear that the party obtaining the default knew of the attorney's representation of the defaulted party in that matter.

Standard of Review

A trial court's refusal to set aside a default judgment is entitled to deference. Boles v. Weidner, 449 N.E.2d 288, 290 (Ind. 1983) (citing Siebert Oxidermo, Inc. v. Shields, 446 N.E.2d 332, 340 (Ind. 1983)) (trial court's decision reviewed for abuse of discretion); Gipson v. Gipson, 629 N.E.2d 952 (Ind. Ct. App. 1994) summ. aff'd 644 N.E.2d 876 (Ind. 1994) (same).

I. Trial Rule 60(B)(1)

A default judgment may be set aside under Trial Rule 60(B)(1) for mistake, surprise or excusable neglect. Under this rule, excusable neglect includes a breakdown in communication that results in a party's failure to appear. Where such a breakdown is established, Rule 60 is met and a default judgment must be set aside. Whittaker v. Dail, 584 N.E.2d 1084, 1087 (Ind. 1992). Smith argues that the trial court abused its discretion in not setting aside the default judgment because of the breakdown in communication within his office.

Even if we accept the facts as related in the affidavits offered by Smith, they are insufficient to require the trial court to set aside the judgment. Prior to the Johnston suit, the office manager for Smith Surgical Group handled all legal matters. The office manager testified that he would have been the one to receive the summonses and that his usual procedure would have been to contact Smith's attorneys. However, because the Smith Surgical Group was facing financial difficulty, the office manager was in the process of leaving the Group and was not in the office during the time the lawsuit was filed and the trial court entered the default judgment. Because the office manager was away, the scrub nurse, who did not normally receive mail, placed the summonses on Smith's desk. Smith did not see the summonses until after the default judgment was entered.

This is neglect, but not excusable neglect as the term appears in Rule 60(B)(1). Smith was aware that the person who normally handled legal mail was no longer doing that job. Nonetheless, Smith ignored his mail, including the summonses and motion for default. We do not agree that the failure of Smith to read his mail amounts to a breakdown in communication sufficient to qualify as excusable neglect under Trial Rule 60(B)(1). Smith's case is distinguishable from our previous decisions finding excusable neglect for a breakdown in communication. In those cases the defendants did all that they were required to do but subsequent misunderstandings as to the assignments given to agents of the defendants resulted in the failure to appear. In Whittaker, the insurance adjuster believed she had employed an attorney to defend the insured but the attorney thought he was to institute a declaratory judgment against the insured. 584 N.E.2d at 1086; see also Boles v. Weidner, 449 N.E.2d 288, 290 (Ind. 1983) (breakdown in communication between the independent agent and the insurance agency). Here, Smith knew his mail was unattended and accepted the risk of adverse consequences. The judicial system simply cannot allow its processes to be stymied by...

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91 practice notes
  • McGrath v. Everest Nat. Ins. Co., Case No. 2:07 cv 34.
    • United States
    • United States District Courts. 7th Circuit. United States District Court of Northern District of Indiana
    • 23 Settembre 2009
    ...Ford in its brief are misleading and inapplicable. The Indiana Supreme Court "warning" quoted by Brenner Ford from Smith v. Johnston, 711 N.E.2d 1259, 1263 (Ind.1999), Page 1111 refers to giving notice of a motion for default to attorneys of record. "A default judgment is appropriate only w......
  • Conner v. Anderson, IP 99-1023-C-B/S.
    • United States
    • U.S. District Court — Southern District of Indiana
    • 15 Gennaio 2003
    ...compelling argument presented to justify departure from [its] well-established rules regarding forfeiture and res judicata." Conner II, 711 N.E.2d at 1259. Conner has not shown the presence of circumstances sufficient to overcome the consequence of his procedural default in not presenting a......
  • Outback Steakhouse of Florida v. Markley, No. 18S04-0602-CV-66.
    • United States
    • Indiana Supreme Court of Indiana
    • 8 Novembre 2006
    ...issue does not violate the rules of civil procedure. See Allstate Ins. Co. v. Watson, 747 N.E.2d 545, 548 (Ind.2001); Smith v. Johnston, 711 N.E.2d 1259, 1264 (Ind.1999). Federal authority interpreting FRCP 60(b)(3) clearly establishes that relief under subsection (b)(3) is available for bo......
  • Price v. Wyeth Holdings Corp., No. 06-2072.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (7th Circuit)
    • 20 Settembre 2007
    ...before allowing entry of a default judgment; failure to comply with that duty requires relief from the judgment. Smith v. Johnston, 711 N.E.2d 1259, 1264 (Ind.1999) ("A default judgment is appropriate only where a party has not appeared in person or by counsel and, if there is a lawyer know......
  • Request a trial to view additional results
91 cases
  • McGrath v. Everest Nat. Ins. Co., Case No. 2:07 cv 34.
    • United States
    • United States District Courts. 7th Circuit. United States District Court of Northern District of Indiana
    • 23 Settembre 2009
    ...Ford in its brief are misleading and inapplicable. The Indiana Supreme Court "warning" quoted by Brenner Ford from Smith v. Johnston, 711 N.E.2d 1259, 1263 (Ind.1999), Page 1111 refers to giving notice of a motion for default to attorneys of record. "A default judgment is appropriate only w......
  • Conner v. Anderson, IP 99-1023-C-B/S.
    • United States
    • U.S. District Court — Southern District of Indiana
    • 15 Gennaio 2003
    ...compelling argument presented to justify departure from [its] well-established rules regarding forfeiture and res judicata." Conner II, 711 N.E.2d at 1259. Conner has not shown the presence of circumstances sufficient to overcome the consequence of his procedural default in not presenting a......
  • Outback Steakhouse of Florida v. Markley, No. 18S04-0602-CV-66.
    • United States
    • Indiana Supreme Court of Indiana
    • 8 Novembre 2006
    ...issue does not violate the rules of civil procedure. See Allstate Ins. Co. v. Watson, 747 N.E.2d 545, 548 (Ind.2001); Smith v. Johnston, 711 N.E.2d 1259, 1264 (Ind.1999). Federal authority interpreting FRCP 60(b)(3) clearly establishes that relief under subsection (b)(3) is available for bo......
  • Price v. Wyeth Holdings Corp., No. 06-2072.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (7th Circuit)
    • 20 Settembre 2007
    ...before allowing entry of a default judgment; failure to comply with that duty requires relief from the judgment. Smith v. Johnston, 711 N.E.2d 1259, 1264 (Ind.1999) ("A default judgment is appropriate only where a party has not appeared in person or by counsel and, if there is a lawyer know......
  • Request a trial to view additional results

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