Sundown v. Intedge Industries
| Decision Date | 17 August 2009 |
| Docket Number | No. 26700.,26700. |
| Citation | 681 S.E.2d 885,383 S.C. 601 |
| Court | South Carolina Supreme Court |
| Parties | SUNDOWN OPERATING COMPANY, INC., a South Carolina Corporation; Sunrise Coin Company, Inc., a South Carolina Corporation; and High Noon Properties, Inc., a South Carolina Corporation; Respondents, v. INTEDGE INDUSTRIES, INC., a New Jersey Corporation; Quickie Food Stores of North Myrtle Beach, Inc., d/b/a Hardwick's Bar & Restaurant Supplies, a South Carolina Corporation; BFPE International, Inc., f/k/a Atlantic Fire Systems, Inc., a Maryland Corporation; Wormald Fire Systems, Inc., f/k/a Ansul Fire Systems, Inc., a Delaware Corporation; and Ansul Incorporated, a Delaware Corporation, Defendants, Of whom BFPE International, Inc., f/k/a Atlantic Fire Systems, Inc., a Maryland Corporation is, Petitioner. |
Eugene Matthews, of Richardson, Plowden & Robinson, of Columbia, and Michael S. Hopewell, of Turner, Padget, Graham & Laney, of Florence, for Petitioner.
Daniel F. Blanchard, III, of Rosen, Rosen and Hagood, of Charleston, Peter F. Asmer, Jr., of Cozen O'Connor, of Charlotte, and Susan C. Rosen, of Rosen Law Firm, of Charleston, for Respondents.
This action for negligence and breach of contract arises out of a fire that burned down a restaurant and pub owned by Respondents Sundown Operating Company, Inc. ("Sundown"), Sunrise Coin Company, Inc. ("Sunrise"), and High Noon Properties, Inc. ("High Noon") (hereinafter referred to collectively as "Respondents"). Respondents filed suit against Defendant BFPE International, Inc. ("Petitioner") and four other defendants (hereinafter referred to collectively as "Defendants"). The trial court granted a default judgment against Petitioner, and following a damages hearing, the master-in-equity awarded damages to Respondents. Both parties appealed. The court of appeals affirmed the trial court. Sundown Operating Co. v. Intedge Indus., Inc., Op. No.2007-UP-091 (S.C. Ct.App. filed Feb. 23, 2007). We granted in part Petitioner's request for a writ of certiorari to review that opinion.
On September 16, 1998, Respondents' restaurant and pub burned down. On August 24, 2001, Respondents filed suit against Defendants, alleging that an electric fryer had malfunctioned and ignited a quantity of frying oil. Respondents had a service contract with Petitioner to install, maintain, inspect, and service the restaurant's fire extinguishing and suppression systems. Respondents asserted claims for negligence and breach of contract against Petitioner, on the grounds that Petitioner failed to properly maintain and inspect the fire suppression system.
Petitioner is incorporated in Maryland and has various business locations in Maryland, Virginia, North Carolina, and South Carolina. At the time of the lawsuit, Petitioner did not have a registered agent listed with the South Carolina Secretary of State.
On August 27, 2001, Respondents mailed copies of the summons and complaint to Donald R. Leonard, who was Petitioner's registered agent in Maryland and North Carolina at the time, at two separate addresses in Myrtle Beach and Rocky Mount, North Carolina. In Myrtle Beach, Petitioner's manager, Randy Adams, received the package and was advised by the mail carrier that he could sign for Leonard, who was absent. Adams signed Leonard's name to the receipt, which was dated and returned to Respondents on August 28, 2001. In Rocky Mount, Leonard himself signed the return receipt on September 4, 2001.
On September 5, 2001, Leonard gave the summons and complaint to the general manager of Petitioner's Clayton, North Carolina office, who then forwarded the papers to Petitioner's vice-president. On or about September 14, 2001, Petitioner's vice-president notified Petitioner's insurance agent of the lawsuit. On October 1, 2001, the vice-president forwarded the summons and complaint to the insurance agent. On October 2, 2001, the insurance agent telephoned Respondents' counsel to request an extension of time to file an answer to the complaint. Respondents' counsel informed the agent that he had already moved for an entry of default based upon the August 28, 2001 service date. On October 2, 2001, the Horry County Clerk of Court filed the entry of default.
On October 18, 2001, Petitioner filed a motion to set aside default and permit enlargement of time. On October 29, 2001, Respondents filed a motion for a default judgment. On December 10, 2001, Respondents moved for, and the Horry County Clerk of Court filed, a second entry of default based upon the September 4, 2001 service date.
On March 18, 2002, the trial court conducted a hearing and found that Petitioner had shown good cause to set aside the entry of default and permit an enlargement of time to file an answer and instructed the company to submit a proposed order. The trial court based its ruling in part on the recent court of appeals decision in Pilgrim v. Miller, 2002 WL 44112 (S.C.Ct.App. Jan.14, 2002) (Pilgrim I). The next day, Respondents' counsel requested that the trial court delay its formal order in light of the Court of Appeals' decision to rehear Pilgrim I. The trial court agreed. On June 17, 2002, the court of appeals reversed its original opinion in Pilgrim I.1 Pilgrim v. Miller, 350 S.C. 637, 567 S.E.2d 527 (Ct.App.2002) (Pilgrim II).
On July 18, 2002, the trial court again heard Petitioner's motion to set aside the entry of default. The trial court issued an order finding the August 28, 2001 service date to be invalid, but held that Petitioner was not entitled to set aside the entry of default with regard to the September 4, 2001 service date.
The case was then referred to the master-in-equity for a hearing to assess damages. The master entered judgment in the amount of: $273,336.00 in actual damages to Sunrise; $394,848.38 in actual damages to Sundown; and $524,800.70 in actual damages to High Noon. The master denied Respondents' requests for prejudgment interest.
The parties filed cross-appeals. The court of appeals held that Respondents were properly denied prejudgment interest; that both the August 28, 2001 and September 4, 2001 service dates were valid; and that the trial court did not err in failing to set aside the entry of default. Both parties filed petitions for a writ of certiorari with this Court. We denied Respondents' petition and granted in part Petitioner's petition. Petitioner presents the following question for our review:
Did the court of appeals err in failing to set aside the entry of default?
The decision whether to set aside an entry of default or a default judgment lies solely within the sound discretion of the trial judge. Harbor Island Owners' Ass'n v. Preferred Island Props., Inc., 369 S.C. 540, 544, 633 S.E.2d 497, 499 (2006). The trial court's decision will not be disturbed on appeal absent a clear showing of an abuse of that discretion. Mitchell Supply Co., Inc. v. Gaffney, 297 S.C. 160, 162-63, 375 S.E.2d 321, 322-23 (Ct.App.1988). An abuse of discretion occurs when the judge issuing the order was controlled by some error of law or when the order, based upon factual, as distinguished from legal conclusions, is without evidentiary support. In re Estate of Weeks, 329 S.C. 251, 259, 495 S.E.2d 454, 459 (Ct. App.1997).
Petitioner contends that it has shown good cause under the minimal standard required by Rule 55(c), SCRCP, and that the trial court and the court of appeals erred in applying a heightened standard to conclude that the company was not entitled to set aside the entry of default. Although we have some concerns about the lower courts' conflation of the Rule 60(b) and Rule 55(c) standards, we do not believe Petitioner meets even the most minimal showing of good cause, and is therefore not entitled to relief from the entry of default.
We must acknowledge at the outset that there has been some recent confusion in the case law regarding the application of the standards for relief set forth in Rule 55(c) and Rule 60(b). We take this opportunity to reassert the basic legal premise that the standard for granting relief under Rule 60(b) is more rigorous than under Rule 55(c), and that an entry of default may be set aside for reasons that would be insufficient to relieve a party from a default judgment.
Rule 55(a) provides that when a party fails to respond to a complaint, the clerk shall record an entry of default. However, Rule 55(c) permits a party to move to set aside the entry of default. The standard for granting relief from an entry of default under Rule 55(c) is mere "good cause." Rule 55(c), SCRCP. This standard requires a party seeking relief from an entry of default under Rule 55(c) to provide an explanation for the default and give reasons why vacation of the default entry would serve the interests of justice. Once a party has put forth a satisfactory explanation for the default, the trial court must also consider: (1) the timing of the motion for relief; (2) whether the defendant has a meritorious defense; and (3) the degree of prejudice to the plaintiff if relief is granted. Wham v. Shearson Lehman Bros., Inc., 298 S.C. 462, 465, 381 S.E.2d 499, 501-02 (Ct.App.1989). The trial court need not make specific findings of fact for each factor if there is sufficient evidentiary support on the record for the finding of the lack of good cause. Dixon v. Besco Engineering, Inc., 320 S.C. 174, 179, 463 S.E.2d 636, 639 (Ct.App.1995). A motion under Rule 55(c) is addressed to the sound discretion of the trial court. Williams v. Stalnaker, 312 S.C. 373, 375, 440 S.E.2d 408, 409 (Ct.App.1994).
Once a default judgment has been entered, a party seeking to be relieved must do so under Rule 60(b), SCRCP. The standard for granting relief from a default judgment under Rule 60(b) is more rigorous than the "good cause"...
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