Attorneys For Appellants Attorneys For Appellees
Charles L. Berger R. Thomas Bodkin
Jennifer Ulrich Pamela J. Hensler
Berger and Berger Bamberger, Foreman, Oswald & Hahn
Evansville, Indiana Evansville, Indiana
Robert R. Faulkner
Weddle Brothers Construction Company, Inc.,
On Petition To Transfer from the Indiana Court of Appeals, No. 82A05-0209-CV-430
November 20, 2003
This appeal challenges the trial court's ruling setting aside default judgments for excusable
neglect. Consistent with this Court's deferential standard of review of trial court
discretion in these matters, we affirm.
Plaintiffs-appellants Pat Coslett, Kim Coslett and L.B. Jones Furniture, Inc. d/b/a Pat Coslett's
Furniture Festival, Inc. ("Coslett's Furniture") initiated this action on June 12, 2001 against
Weddle Brothers Construction Company, Inc. ("Weddle Brothers"), Vanderburgh County, and others
delay in the construction of a bridge. Two days after suit was
filed, Coslett's Furniture effected service on Weddle Brothers by certified mail at its
corporate headquarters in Bloomington, Indiana. When the complaint was received, Weddle Brothers
sent a copy of the complaint and summons to its insurance agent, Tobias
Insurance Agency, through which it had obtained a commercial general liability policy with
Zurich North American Insurance. Vanderburgh County filed its answer and cross-claim against Weddle
Brothers on September 4, 2001, obtaining service by certified mail. However, Weddle
Brothers did not timely file any answers or other responsive pleadings with the
trial court. Default judgments were entered against Weddle Brothers on July 13,
2001 as to the plaintiffs' complaint, and on October 11, 2001 as to
Vanderburgh County's cross-claim.
On November 30, 2001, a claims manager for Zurich North American Insurance wrote
to Weddle Brothers, advising it that Coslett's Furniture's claims were not covered under
the Weddle Brothers policy. When Weddle Brothers received that letter in mid-December,
it immediately sought and retained counsel, and on February 6, 2002, moved to
set aside the default judgments on the grounds of improper service and excusable
neglect. Following extensive further briefing and argument, the trial court set
aside the default judgments. The Court of Appeals reversed in a memorandum
decision. 783 N.E.2d 806 (Ind. Ct. App. 2003) (table). We granted
Once entered, a default judgment may be set aside because of mistake, surprise,
or excusable neglect
so long as the motion to set aside the default
is entered not more than one year after the judgment and the moving
party also alleges a meritorious claim or defense. Ind. Trial Rule 55(C);
60(B). When deciding whether or not a default judgment may be set
aside because of excusable neglect, the trial court must consider the unique factual
background of each case because "no fixed rules or standards have been established
as the circumstances of no two cases are alike." Siebert Oxidermo, Inc.
v. Shields, 446 N.E.2d 332, 340 (Ind. 1983); quoting Grecco v. Campbell, 386
N.E.2d 960, 961 (Ind. Ct. App. 1979); see also Boles v. Weidner, 449
N.E.2d 288, 290 (Ind. 1983). Though the trial court should do what
is "just" in light of the facts of individual cases, that discretion should
be exercised in light of the disfavor in which default judgments are held.
Allstate Ins. Co. v. Watson, 747 N.E.2d 545, 547 (Ind. 2001).
A ruling denying or granting relief on a motion to set aside a
default is deemed a final judgment from which an appeal may be taken.
T.R. 60(C). On appeal, a trial court's decision to set aside
a default judgment is entitled to deference and is reviewed for abuse of
discretion. Watson, 747 N.E.2d at 547; Smith v. Johnston, 711 N.E.2d
1259, 1262 (Ind. 1999). Any doubt of the propriety of a default
judgment should be resolved in favor of the defaulted party. Watson, 747
N.E.2d at 547; Green v. Karol, 168 Ind. App. 467, 475, 344 N.E.2d
106, 111 (1976). Indiana law strongly prefers disposition of cases on their
merits. State v. Van Keppel, 583 N.E.2d 161, 162 (Ind. Ct. App.
1991). A trial court will not be found to have abused its
discretion "so long as there exists even slight evidence of excusable neglect."
Security Bank & Trust Co. v. Citizens Nat. Bank, 533 N.E.2d 1245, 1247
(Ind. Ct. App. 1989).
In several cases we have confronted the propriety of setting aside default judgments
when a defendant's insurer or insurance agent is notified but counsel fails to
timely appear and answer. In
Boles v. Weidner, 449 N.E.2d 288 (Ind.
1983), this Court affirmed a trial court's decision to set aside a default
judgment, finding excusable neglect where the defendant passed the summons and complaint on
to his independent insurance agent, to be forwarded on to the insurer.
However, because of a "breakdown in communication," the insurer never received notice of
the suit. Id. at 290. We held that "since [the defendant]
did not hear from anyone, and had taken the steps expected of him,
it certainly is reasonable for the trial court to find there was excusable
neglect justifying setting aside the default judgment." Id. at 291.
Seibert Oxidermo, Inc. v. Shields, 446 N.E.2d 332 (Ind. 1983), the trial
court refused to set aside a default judgment where the defendant had forwarded
the "suit papers" to its insurance agent, who failed to get them to
the proper insurance carrier on time. 446 N.E.2d at 334. We
affirmed, observing that the trial court could have based a finding of excusable
neglect or mistake upon the apparent misunderstanding between the defendant and its insurance
agent but chose not to do so, and noting, "[m]ore significantly, under the
evidence it was not compelled to do so." Id. at 340.
Whittaker v. Dail, 584 N.E.2d 1084 (Ind. 1992), the trial court refused
to set aside a default judgment. The defendant had personally retained counsel
that represented him during the three years the case was pending, but his
lawyers were permitted to withdraw two months before trial because Whittaker had not
paid their fees. Upon receiving notice of a pre-trial conference, he called
his insurance company which, on his behalf, contacted a law firm, but the
firm believed that it had been hired not to defend the defendant, but
to file a declaratory judgment against him. Id. at 1086-87. Noting
that the case had been pending for three years and that there was
no evidence of the plaintiff's lack of diligence other than his inability to
continue to pay his attorneys, we reversed the trial court and set aside
the default judgment.
Smith v. Johnston, 711 N.E.2d 1259 (Ind. 1999), the trial court declined
to set aside a default judgment entered against a defendant who had failed
to inform his counsel that he had been sued. Although finding the
default judgment should be set aside on other grounds,
we stated: "There may
be cases where a trial court will find excusable neglect based on similar
omissions due to external pressures on a sympathetic defendant, but it was not
an abuse of the trial court's discretion to refuse to do so here."
Id. at 1262.
Coslett Furniture and Vanderburgh County argue that
Boles and Whittaker are distinguishable because
in those cases, had the communication "breakdown" not occurred, the insurance companies would
have come to the defense of their insureds. They point out that
here, the insurer made no representations that it intended to defend the suit
on Weddle Brothers' behalf, and the Company instead unreasonably assumed, without any specific
evidence, that the insurer would retain counsel for its defense. Instead,
the Appellants urge us to consider Smith and Seibert Oxidermo, which found no
error in the refusal to set aside default judgments under facts similar to
the present case.
Significantly, in three of these four cases,
Boles, Seibert Oxidermo, and Smith, we
deferred to the decision of the trial court in ruling upon a motion
to set aside a default. And in the fourth, Whittaker, we found
that the record "unequivocally reveals" facts that compelled us to find an abuse
of discretion. 584 N.E.2d at 1087.
To resolve this appeal, the overriding issue is whether the circumstances of this
case require us to conclude that the trial court abused its discretion in
setting aside its prior default judgments. In accord with our disfavor of
default judgments, our preference for disposition of cases on their merits, and our
deference to trial court decisions in ruling upon motions to set aside default
judgments, the controlling question is not whether there has been a "breakdown in
communication" but whether there is "even slight evidence of excusable neglect."
Bank & Trust Co., 533 N.E.2d at 1247.
Here the trial court noted both the important role of default judgments in
the efficient administration of justice and the judicial preference for deciding disputes on
their merits. It stated: "One can easily argue that Weddle Brothers did
respond to this lawsuit in a reasonable manner. It argues that it
handled the complaints the way it always does, by notifying its insurance company."
Appellant's Appendix at 174. The trial court observed that the case
"concerns substantial amounts of money and weighty policy determinations,"
id. at 176, and
considered whether "a client should have to look over its representative's shoulder to
make sure it is being defended." Id. The trial court concluded, "considering
all the facts and circumstances involved, the Court finds Weddle Brothers has shown
excusable neglect and that it has a meritorious defense to both the plaintiffs'
and the County's claims against it." Id. We conclude that the
ruling of the trial court is supported by evidence of excusable neglect, is
entitled to deference, and was not an abuse of discretion.
We affirm the decision of the trial court to set aside the default
Shepard, C.J., and Sullivan and Boehm, J., concur. Rucker, J., dissents without