United Fire & Cas. Co. v. P & C Ins. Services, Inc.
| Decision Date | 17 March 1992 |
| Docket Number | Nos. 17651,17661,s. 17651 |
| Citation | 488 N.W.2d 661 |
| Parties | UNITED FIRE & CASUALTY COMPANY, Plaintiff and Appellee, v. P & C INSURANCE SERVICES, INC., d/b/a Dakota Jordan & Associates, and Gerald Salmen, Defendants and Appellants, and Marilyn Jahner, Defendant. . Considered on Briefs |
| Court | South Dakota Supreme Court |
Gary D. Jensen of Lynn, Jackson, Shultz & Lebrun, Rapid City, for plaintiff and appellee.
Kenneth E. Jasper of Jasper Law Office, Rapid City, for defendants and appellants.
This is an appeal from a default judgment which was granted in this action to regain possession of insurance files and to recover amounts due on a contract and promissory note. We affirm in part and reverse in part.
P & C Insurance Services, Inc. d/b/a Dakota Jordon and Associates (Insurance Services) was a corporation organized under the laws of South Dakota, with its principal place of business located in Rapid City, South Dakota. Insurance Services sold property and casualty insurance.
On January 5, 1988, United Fire and Casualty Company (United Fire) and Insurance Services executed an agency agreement which authorized Insurance Services to solicit business on behalf of United Fire. Sometime thereafter, Insurance Services defaulted on its obligations to United Fire by failing to remit premiums. On May 22, 1990, United Fire made a formal demand for the payment of monies owed on account pursuant to the contract and for money due on a promissory note signed by Gerald Salmen, a majority stockholder, both personally and as agent for Insurance Services.
On June 8, 1990, United Fire was informed by the South Dakota Secretary of State's Office that Insurance Services' charter had been canceled on December 15, 1989, for its failure to comply with South Dakota's reporting requirements.
United Fire initiated this suit against Insurance Services, Salmen, and Marilyn Jahner 1 to regain possession of all the books and records of Insurance Services; and for judgment (1) giving them permanent ownership of the "book of business"; (2) all amounts owed to United Fire plus interest; and (3) for a judgment for United Fire's costs, disbursements and attorney fees.
Along with the summons and complaint, United Fire served upon Insurance Services, Salmen, and Jahner, 2 and Jerome Kutil, 3 an order to show cause why United Fire should not be given possession of the insurance files. United Fire also filed an affidavit in claim and delivery. The trial court entered its order to show cause, requiring Insurance Services, Salmen, and Jahner to appear ten days later for the show cause hearing on June 18, 1990.
Salmen appeared personally at the show cause hearing. John Ruff, Insurance Services' manager, also appeared. During the hearing, it became apparent that there was some confusion as to the number and location of the insurance files. In fact, Salmen stated: "We are representing 196 clients and yet we can only find 49 files."
The trial court entered an order requiring Insurance Services to assemble and deliver to United Fire all of the books and records for the insurance policies solicited and written for United Fire. 4 The files were produced and United Fire copied all documents and made a detailed inventory which it filed with the trial court. Thereafter, the files were turned over to a local insurance agency for management.
On January 3, 1991, the trial judge sent a letter to United Fire's attorney and Jahner's attorney to ascertain the status of the case. United Fire responded by stating that it was still in the process of determining the amount owed to it. United Fire sent copies of this letter to Jahner's attorney and Salmen. The letter also stated that United Fire would proceed as soon as this amount was determined. 5
On May 16, 1991, after the accounting had been completed and since no answer had been filed by either Insurance Services or Salmen, United Fire filed and served a motion for default judgment. United Fire supported this motion with an affidavit specifically setting out the amounts owed to it.
Insurance Services and Salmen (by this time having finally retained counsel) responded by submitting a motion to set aside default 6 based on the grounds that the default occurred through mistake, inadvertence, surprise, or excusable neglect. In support of this motion, Insurance Services and Salmen submitted affidavits from Salmen and Kutil which stated that they thought the lawsuit was terminated upon their delivering the files.
The trial court granted United Fire's motion for default judgment against Insurance Services and Salmen and entered an order on the issue of the taxation of costs. The order granted United Fire the sum of $29,258.34 (including interest) on the promissory note and the sum of $12,412.24 (including interest) on the overdue premium charges for a total of $41,670.58. Additionally, United Fire was awarded $527.11 for costs. This appeal was then taken by Insurance Services and Salmen who we will herein periodically refer to as appellants.
Whether a party who "appears" at an order to show cause hearing is in default if it thereafter fails to file an answer.
Appellants contend that they were not in default because Salmen was present at the show cause hearing. SDCL 15-6-12(a) provides: "A defendant shall serve his answer within thirty days after the service of the complaint upon him, except when otherwise provided by statute or rule."
It is apparent from the record that Insurance Services and Salmen were clearly in default as more than thirty days passed from the time they were served with the complaint until they answered. We find no merit to appellants' argument that their "appearance" at the show cause hearing satisfied the requirements of SDCL 15-6-12(a). Tingle v. Parkston Grain Co., 442 N.W.2d 252 (S.D.1989); Williams Ins. v. Bear Butte Farms TNP, 392 N.W.2d 831 (S.D.1986).
Whether appellants have established good cause for setting aside the default.
Appellants contend that they believed that if they delivered the files to United Fire after the show cause hearing the matter would be resolved. They argue that their inaction was therefore excusable neglect. SDCL 15-6-60(b)(1) provides that the court may relieve a party from a default upon a showing of "good cause":
On motion and upon such terms as are just, the court may relieve a party or his legal representative from a final judgment, order, or proceeding for the following reasons:
(1) Mistake, inadvertence, surprise, or excusable neglect[.]
"Excusable neglect" has no fixed meaning and the trial court must determine from the facts and circumstances of each case whether the neglect should be excused. Gunvordahl v. Knight, 73 S.D. 638, 47 N.W.2d 561 (1951). We have also stated that the term should be "interpreted liberally to insure that cases are heard and tried on the merits." Phipps v. First Federal Sav. & Loan, 438 N.W.2d 814, 819 (S.D.1989); Eby v. Misar, 345 N.W.2d 381 (S.D.1984). However, the relief afforded under this section is left to the sound discretion of the trial court. Tingle, 442 N.W.2d at 254; Haggar v. Olfert, 387 N.W.2d 45 (S.D.1986); Rogers v. Rogers, 351 N.W.2d 129 (S.D.1984); Overvaag v. City of Dell Rapids, S.D., 319 N.W.2d 171 (S.D.1982). This court will not overturn the trial court's decision unless there has been abuse of that discretion. Clarke v. Clarke, 423 N.W.2d 818 (S.D.1988). This court has made it clear that:
A defendant has a right to serve as his own counsel; however, having exercised this right, it would be unjust to allow defendant liberties not accorded to those who seek out members of the Bar to represent them in cases such as this.
Sunpower, Inc. v. Hawley, 296 N.W.2d 532, 533 (S.D.1980); Farmers Cooperative El. Co. of Revillo v. Johnson, 90 S.D. 36, 237 N.W.2d 671 (1976).
"Excusable neglect must be neglect of a nature that would cause a reasonable, prudent person to act similarly under similar circumstances." Clarke, 423 N.W.2d at 821. Appellants were served with a summons, wherein it stated that the failure to answer within thirty days could result in default judgment. It is important to point out that one of the defendants in the original action (Jahner) retained counsel and answered the complaint and, as a result, United Fire could not pursue a default judgment against her. Had appellants similarly retained counsel when served with the complaint, they would find themselves in a much different position. Similarly, nothing prevented them from filing a pro se answer.
Considering all of the foregoing, we cannot say the trial court abused its discretion in either not excusing the default or in granting the judgment.
Whether United Fire adequately substantiated its monetary claims against appellants.
SDCL 15-6-55(b)(1) provides:
Judgment by default may be entered as follows:
(1) By the Court ... If, in order to enable the court to enter judgment or to carry it into effect, it is necessary to take an account or to determine the amount of damages or to establish the truth of any averment by evidence ... the court may conduct such hearings or order such references as it deems necessary and proper[.]
Contrary to appellants' argument, the complaint and evidence submitted justify the judgment and there was no need for an evidentiary hearing. The complaint alleged:
1. Salmen was a majority stockholder of Insurance Services and because Insurance Services' charter had been revoked by the State of South Dakota, Salmen "must be responsible for the book of business referred to below."
2. United Fire contracted with Insurance Services, allowing Insurance Services to solicit and service the book of business at issue.
3. Insurance Services subsequently defaulted on its obligations to United Fire for the book of business at issue and, as a result, was delinquent and "owed United Fire in excess of $32,000."
As a result, United Fire, in its...
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