Somerville Auto Transp. Serv., Inc. v. Auto. Fin. Corp.

• Decision Date: 02 July 2014
• Docket Number: No. 49A02–1307–CC–559.,49A02–1307–CC–559.
• Citation: 12 N.E.3d 955
• Parties: SOMERVILLE AUTO TRANSPORT SERVICE, INC. and Robert Souza, Appellant–Defendant, v. AUTOMOTIVE FINANCE CORPORATION, Appellee–Plaintiff.
• Court: Indiana Appellate Court

12 N.E.3d 955

SOMERVILLE AUTO TRANSPORT SERVICE, INC. and Robert Souza, Appellant–Defendant,

v.AUTOMOTIVE FINANCE CORPORATION, Appellee–Plaintiff.

No. 49A02–1307–CC–559.

Court of Appeals of Indiana.

July 2, 2014.

Peter S. Kovacs, Fishers, IN, Attorney for Appellant.

Tracy N. Betz, Taft Stettinius & Hollister LLP, Indianapolis, IN, Attorney for Appellee.

OPINION

BROWN, Judge.

Somerville Auto Transport Service, Inc., and Robert Souza (together, "Somerville") appeal the trial court's orders placing the cause of action on the active docket and granting summary judgment in favor of Automotive Finance Corporation ("AFC"). Sommerville raises two issues, which we revise and restate as:

I. Whether the court abused its discretion in placing the cause of action on the active docket; and

II. Whether the court erred in entering summary judgment in favor of AFC and against Somerville.

We affirm.

FACTS AND PROCEDURAL HISTORY

Loan

Somerville operated an auto dealership in Somerville, Massachusetts. AFC was in the business of lending money to auto dealers to allow the dealer to acquire automobiles at auction for resale to the dealers' customers.

In October 2002, Somerville and AFC executed a Demand Promissory Note and Security Agreement (the "Agreement"). Pursuant to the Agreement, Somerville could request advances against a line of credit to finance its purchase of automobiles for resale. Also, in October 2002, Souza, the principal of Somerville, executed an Unconditional and Continuing Personal Guaranty which provided he was personally liable for Somerville's indebtedness to AFC. On February 24, 2006, on behalf of Somerville, Souza executed a Representation Authorization Letter stating in part that Robson Merenciano was authorized to buy and sell automobiles for Somerville and to execute company checks or drafts and any other necessary instruments or documents. AFC made advances to Merenciano against Somerville's line of credit for the purchase of certain automobiles between September 2006 and February 2007, and Somerville did not timely repay AFC with respect to the amounts advanced for the purchase of these automobiles. On February 20, 2007, Somerville executed a Representation Removal Letter stating Merenciano was no longer authorized to conduct business on behalf of Somerville.

Proceedings

On October 30, 2008, AFC filed a complaint alleging under Count I that Somerville was in breach of contract by failing to repay its indebtedness pursuant to the terms of the Agreement; under Count II that Souza was personally liable for the indebtedness of Somerville under the Guaranty; and under Count III that Somerville and Souza committed fraud. AFC requested judgment under Counts I and II in the principal amount of $89,233.87 together with default interest, floorplan fees, late fees, attorney fees, and costs of collection. According to the chronological case summary ("CCS"), on April 13, 2009, Somerville filed a motion for stay of proceedings pending final adjudication of a related federal action, and on June 1, 2009, AFC filed a response in opposition to Somerville's motion. The court denied the motion for stay on June 2, 2009.

Trial Rule 41(E) Proceedings

On June 7, 2010, the trial court sua sponte issued notice to the parties that the cause was scheduled for hearing under Trial Rule 41(E) on June 28, 2010. On June 25, 2010, AFC filed a motion to vacate the hearing.¹

On May 2, 2011, the court sua sponte issued a notice to the parties that the cause would be dismissed under Trial Rule 41(E) at a hearing on June 27, 2011, unless sufficient cause was shown; however the court did not hold the scheduled hearing.²

On June 27, 2011, AFC filed a Response to Rule 41(E) Notice which stated that it had appeared by counsel in open court on June 27, 2011 to show cause why the lawsuit should not be dismissed for inactivity and that it was submitting in writing its response to the court's notice "as follows: AFC submits that this matter has not been inactive, and requests that this matter remain pending because AFC has been conducting discovery as it prepares for trial. Indeed, AFC is presently awaiting [Somerville's] responses to its pending interrogatories and requests for production of documents." Appellants' Appendix at 33.

On June 28, 2011, the trial court entered an order stating:

This Cause having come before the Court on its own motion pursuant to Indiana Trial Rule 41(E), all parties having been given due notice, and the Court being duly advised.

IT IS THEREFORE ORDERED, ADJUDGED, AND ADJUDICATED that this case is hereby dismissed with prejudice.

Id. at 31.

On July 6, 2011, the court sua sponte entered a CCS entry which provided:

JACKET ENTRY: COURT HAVING REVIEWED [AFC'S] RESPONSE TO RULE 41(E) NOTICE HEREBY ORDERS THAT CAUSE IS REINSTATED ON COURT'S ACTIVE DOCKET. NOTICE TO ATTORNEYS.

Id. at 3.

On July 12, 2011, Somerville filed a Verified Motion to Reconsider and Vacate Order Reinstating This Case arguing that the July 6, 2011 order was void because "Indiana decisional authority and Rule 41(F) are clear that a Trial Rule 41(E) dismissal, with prejudice, can only be granted upon a showing by [AFC] satisfying Trial Rule 60(B)." Id. at 35. Somerville's motion also stated that, "[a]lthough not directly relevant to this Motion, it should be noted that the Court's reliance on AFC's response to Rule 41(E) notice to reinstate this case may be mistaken" and that "Somerville has not had an opportunity to respond substantively to AFC's assertion that this case is ‘active’...." Id. at 38.

On July 25, 2011, AFC filed a Verified Response to Somerville's Motion to Reconsider arguing in part that the court had the authority to enter the July 6, 2011 order under Trial Rule 60(A) because the "June 28, 2011 order appears to have been based on an oversight or omission—namely the Court's mistaken belief that AFC did not appear at the appointed date and time to show cause why the case should remain active" and "once the Court learned that the assumption on which it based its June 28 order was incorrect, it entered a corrective order reinstating the case." Id. at 43. AFC also argued that the June 28, 2011 order dismissing the case was entered even though no Trial Rule 41(E) hearing was held on June 27, 2011, that Trial Rule 41(E)'s hearing requirement is essential and mandatory under the rule, and that the court's dismissal order was erroneous and the court acted appropriately in correcting the error.

Somerville filed a reply on July 27, 2011, arguing that motions under Trial Rule 60(A) are not to be used for purposes of correcting errors of substance, that the order dismissing the case cannot be described as one which is clerical in nature, and that a dismissal with prejudice may be set aside only in accordance with the provisions of Trial Rule 60(B) as required by Trial Rule 41(F). Somerville also argued that "[w]hen a court orders a hearing and notice of the hearing is sent to the plaintiff, the hearing requirement of Trial Rule 41(E) is satisfied, regardless of whether the plaintiff or his counsel attends the hearing." Id. at 52.

On September 7, 2011, the court held a hearing on the motion to reconsider. At the hearing, the court stated:

[L]et's just get it on the record.... I was here that morning.... And if it had been reported to me by my staff that you gentlemen were here for this hearing, believe me, we would have conducted a 41(E) hearing.

But what happened, in essence, is exactly what [AFC's counsel] described. It was reported to me upon submission of [Somerville's counsel's] proposed order dismissing the case with prejudice that no one appeared on behalf of [AFC] that morning, which is not accurate.

And as a result thereof, I reviewed the proposed and tendered order and obviously I signed off on it.

And it was only then, as the record reflects and you gentlemen are well aware, days later that I became aware of the response [AFC] filed that day on the 27th, entered by the clerk I think on the 29th, and then probably brought to my attention a day or two later. You know, we had the three day holiday weekend. And obviously upon my review of what [AFC] had, in fact, filed on that day, I sua sponte, without question, entered the order reinstating the cause.

Wow. What interesting arguments honestly that are technically being made in this matter that I have never been asked to consider because frankly I've never been in a situation like this.

I'm going to need to take a look at it because my first reaction is clerical? Not really. Boy. We're talking substantive. When I'm reinstating a case that's been dismissed with prejudice and you look at the language in Trial Rule 41 and its pretty straightforward about if you have a dismissal with prejudice, you look at 60(B).

I guess that's why I'm wondering—I suggest at the outset, you know, if I ultimately grant your motion, you file the 60(B) maintaining a mistake—granted not your mistake. And I don't know why it's necessarily to be interpreted to be your mistake.

* * * * *

You know, frankly, if we'd had the 41(E) hearing that morning, I think I know, in fact, what I would have been inclined to do and this case would likely have been allowed to proceed quite frankly.

Transcript at 30–32, 34. The court took the matter under advisement.

On September 9, 2011, the court issued an order denying Somerville's motion to reconsider stating in part:

The Court's June 28, 2011 order was based on an oversight or omission—namely the Court's mistaken belief that AFC did not appear at the appointed date and time to show cause why the case should remain active. Once the Court learned that the assumption on which it based its June 28 order was incorrect, it entered a corrective order reinstating the case. Rule 60(A) allows a court on its own initiative to correct clerical mistakes and oversights or omissions which plague a judgment. Sarna v. Norcan [NorCen ] Bank, 530 N.E.2d 113 (Ind.Ct.App. at 1988) [, reh'g denied, trans. denied ]. There were several

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