Opinion ID: 1043964
Heading Depth: 2
Heading Rank: 1

Heading: Motions to Set Aside Previous Decisions

Text: As the circumstances of this case illustrate, confusion may arise as to which procedural rule governs motions to set aside previous trial court decisions. In order to resolve this confusion, we take this opportunity to consider each rule available to parties seeking relief from previous trial court decisions and to explain the stage of the proceedings at which each of these rules applies.
Pursuant to Tennessee Rule of Civil Procedure 54, any order or other form of decision, however designated, that adjudicates fewer than all the claims or the rights and liabilities of fewer than all the parties . . . is subject to revision at any time before the entry of the judgment adjudicating all the claims and the rights and liabilities of all the parties. Tenn. R. Civ. P. 54.02; see also Tenn. R.App. P. 3(a) ([A]ny order that adjudicates fewer than all the claims or the rights and liabilities of fewer than all the parties is not enforceable or appealable and is subject to revision at any time before entry of a final judgment [17] adjudicating all the claims, rights, and liabilities of all parties.). [18] Thus, motions seeking relief from a trial court's decision adjudicating fewer than all the claims, rights, and liabilities of all the parties, should be filed pursuant to Rule 54.02.
Tennessee Rule of Civil Procedure 59 expressly authorizes four categories of motions: (1) under Rule 50.02 for judgment in accordance with a motion for a directed verdict; (2) under Rule 52.02 to amend or make additional findings of fact, whether or not an alteration of the judgment would be required if the motion is granted; (3) under Rule 59.07 for a new trial; or (4) under Rule 59.04 to alter or amend the judgment. Tenn. R. Civ. P. 59.01. Furthermore, the specified motions are the only means for extending the time for taking steps in the regular appellate process. Id.; see also Tenn. R.App. P. 4(b). Rule 59.02 provides that [a] motion for new trial and all other motions permitted under this rule shall be filed and served within 30 days after judgment has been entered in accordance with Rule 58. Tenn. R. Civ. P. 59.02. Rule 58 states in relevant part: Entry of a judgment or an order of final disposition is effective when a judgment containing one of the following is marked on the face by the clerk as filed for entry. . . . Tenn. R. Civ. P. 58. Reading Rule 59.02 in conjunction with Rule 58, it is clear that Rule 59 motions relate to final judgmentsjudgments adjudicating all the claims, rights, and liabilities of all the parties. See Harris v. Chern, 33 S.W.3d 741, 743-44 (Tenn.2000) (Rule 59.04 addresses final judgments and requires a motion to alter or amend to be made within 30 days of the entry of judgment.). The purpose of Tenn. R. Civ. P. 59 motions is to prevent unnecessary appeals by providing the trial courts with an opportunity to correct errors before a judgment becomes final.  Bradley v. McLeod, 984 S.W.2d 929, 933 (Tenn.Ct. App.1998) (emphasis added), overruled on other grounds by Harris, 33 S.W.3d at 744. Thus, for thirty days after entry of a final judgment, motions for relief should be premised upon Rule 59.
In the event that a party waits to seek relief for more than thirty days after entry of a final judgment, the trial court cannot grant relief under Rule 59. See Tenn. R. Civ. P. 59.02. After this time, relief must be sought pursuant to Tennessee Rule of Civil Procedure 60.02. See, e.g., Campbell v. Archer, 555 S.W.2d 110, 112 (Tenn. 1977) (The function of [Rule 60.02] is to give relief from final judgments; Rule 59, providing for motion for new trial, is the appropriate remedy for asserting alleged errors affecting a judgment which has not yet become final.  (emphasis added)). [19] Rule 60.02 states in relevant part: On motion and upon such terms as are just, the court may relieve a party or the party's legal representative from a final judgment, order or proceeding for the following reasons: (1) mistake, inadvertence, surprise or excusable neglect; (2) fraud (whether heretofore denominated intrinsic or extrinsic), misrepresentation, or other misconduct of an adverse party; (3) the judgment is void; (4) the judgment has been satisfied, released or discharged, or a prior judgment upon which it is based has been reversed or otherwise vacated, or it is no longer equitable that a judgment should have prospective application; or (5) any other reason justifying relief from the operation of the judgment. The motion shall be made within a reasonable time, and for reasons (1) and (2) not more than one year after the judgment, order or proceeding was entered or taken. A motion under this Rule 60.02 does not affect the finality of a judgment or suspend its operation, but the court may enter an order suspending the operation of the judgment upon such terms as to bond and notice as to it shall seem proper pending the hearing of such motion. Tenn. R. Civ. P. 60.02 (emphasis added).
Applying the foregoing principles to the facts of this case, we conclude that the motion seeking relief from the trial court's May 22, 2007 order of default judgment should have been premised on Rule 54.02. The order of default judgment did not adjudicate all of the claims, rights, and liabilities of all the parties. Rather, liability on Discover's complaint and damages on Morgan's counter-complaint remained unresolved. Because the trial court did not adjudicate all the claims between all the parties, or certify the order of default judgment as final pursuant to Rule 54.02, neither Rule 59 nor Rule 60.02 applied. In so holding, we reject Morgan's contention that Rule 60.02 applied, despite the non-final nature of the May 22, 2007 order of default judgment, by virtue of Rule 55.02, which states: For good cause shown the court may set aside a judgment by default in accordance with Rule 60.02. Tenn. R. Civ. P. 55.02. The Court of Appeals recently addressed the question of how Rule 55.02 and Rule 60.02 overlap. See Patterson v. SunTrust Bank, 328 S.W.3d 505, 511 (Tenn.Ct.App.2010). In Patterson, the trial court entered judgment by default against the defendant on July 29, 2008, but did not address damages. Id. at 508. The court later awarded the plaintiff damages in an order issued June 2, 2009. Id. at 509. On appeal, the defendant argued that the trial court erred in refusing to set aside the judgment by default of July 29, 2008. Id. In this context, the Court of Appeals clarified a common misunderstanding: In practice, lawyers frequently refer to an order such as the one entered in this case on July 29, 2008, as a `judgment by default' or a `default judgment.' However, it is clear to usin reading Tenn. R. Civ. P. 55.01that the `judgment by default' referred to in Tenn. R. Civ. P. 55.02 is a judgment such as the one entered in this case on June 2, 2009, i.e., a final judgment. Id. at 511. In Patterson, the default judgment of July 29, 2008 was not final because it did not resolve all the claims between the parties. The trial court later entered its final judgmentwhich, of course, was a judgment following a default on June 2, 2009. Id. (emphasis added). We agree that judgment by default, at least for purposes of Rule 55.02, means a final judgment following a default that resolves all issues in the case, including damages. Accordingly, for the reasons explained above, we conclude that Discover's motion seeking relief from the trial court's May 22, 2007 order of default judgment should have been premised upon and evaluated pursuant to Rule 54.02, rather than Rule 60.02. This is true because the order resolved fewer than all the claims or the rights and liabilities of fewer than all the parties.
Having affirmed the proper rule to be used when seeking revisions to a non-final order, we next consider what test for relief should apply. [20] We recognized in Harris that we had not articulated a standard for courts to apply when ruling on motions filed pursuant to Rule 54 to set aside partial summary judgments, but we noted that other states had applied Rule 59 standards when evaluating such motions under Rule 54. Harris, 33 S.W.3d at 744 (citing Thomas v. Swindle, 676 So.2d 333, 335 (Ala.Civ.App. 1996)). While no Tennessee case has enunciated the proper test for motions seeking relief from non-final default judgments, [21] following the lead of Harris, we find it appropriate to look to cases applying Rule 59 to motions for relief from final judgments by default. In Campbell v. Archer , where neither the defendants nor their counsel had notice of the trial date until it began without them, the trial court refused permission to approach the bench upon their arrival, and the jury returned a verdict for the plaintiffs. 555 S.W.2d at 111-12. The defendants sought a new trial on the grounds that their failure to appear was, at most, excusable neglect, and that the judgment against them was a default within the meaning of Rule 55.01, entitling them to notice they had not received. Id. at 112. We held that, regardless of whether such a judgment is a default, the defendants met the burden for relief under Rule 59. Id. Specifically, we found that (1) the absence had not been willful, (2) the defendants alleged a meritorious defense, and (3) a new trial would not prejudice the plaintiffs. Id. at 112-13. As all three factors favored relief, Campbell did not discuss whether any particular factor was necessary or sufficient. Soon thereafter, we adopted the same test for evaluating Rule 60.02(1) motions for relief from default judgments on excusable neglect grounds, consistent with the federal paradigm: In applying Rule 60(b)(1) [of the Federal Rules of Civil Procedure] in the context of default judgments, courts have gone beyond the bare wording of the rule and established certain criteria which should be considered in deciding whether the designated standards have been satisfied. These criteria ... include (1) whether the default was willful; (2) whether the defendant has a meritorious defense; and (3) the level of prejudice that may occur to the non-defaulting party if relief is granted. Tenn. Dep't of Human Servs. v. Barbee, 689 S.W.2d 863, 866 (Tenn. 1985) (quoting Davis v. Musler, 713 F.2d 907, 915 (2d Cir. 1983)). [22] In Barbee, a paternity action, the defaulting party did not seek relief until three months after the default judgment resolved the one and only claim between the parties. Id. at 864-65. As more than thirty days had passed since the entry of final judgment, we applied Rule 60.02(1), but we also found it immaterial which rule technically governed: While the Campbell case involved a motion for a new trial under Rule 59 of the Tennessee Rules of Civil Procedure, the analysis employed by the Court in that case is equally applicable to the facts involved in the case at bar. Id. at 867. [23] As the Court of Appeals has noted, Rule 59.04 and Rule 60.02(1) each provide a vehicle for seeking relief from orders entered as a result of `mistake, inadvertence, or excusable neglect' by a party's counsel. Ferguson v. Brown, 291 S.W.3d 381, 387 (Tenn.Ct.App. 2008) (quoting Campbell, 555 S.W.2d at 112). Together with his motion to set aside the default judgment, the defendant in Barbee filed an affidavit in which he denied paternity and stated that neither he nor his attorney had received notice of the trial, which established his paternity of the child in question. In opposing the motion to set aside, the plaintiff made no claim that it would suffer prejudice if the motion were granted. On this record, we found that all three factors favored relief: There has been no showing that the plaintiff suffered any prejudice when the trial court set aside the default.... The record demonstrates that the defendant had a meritorious defense to the plaintiff's claims.... Moreover, there is no proof in the record that the defendant's default was culpable or willful. Barbee, 689 S.W.2d at 868. As in Campbell, therefore, we did not discuss whether any particular factor was dispositive. While most federal circuits employ a test similar to that of Barbee for deciding whether relief from a default judgment should be granted on excusable neglect grounds pursuant to Federal Rule of Civil Procedure 60(b)(1), [24] many decisions from these circuits do not articulate how the three enumerated factorswillfulness (or culpability), a meritorious defense, and prejudiceshould be weighed relatively to one another, e.g., Effjohn Int'l Cruise Holdings, Inc., 346 F.3d at 563. Recent cases, however, tend to treat willful or culpable conduct as dispositive. Jenkens & Gilchrist v. Groia & Co., 542 F.3d 114, 122 (5th Cir. 2008) (If [defendant's] default was willful then the district court's denial of [Federal Rule of Civil Procedure] 60(b)(1) relief may be affirmed on that ground alone.); Franchise Holding II, LLC, 375 F.3d at 926 (holding that the trial court's finding that defendant's culpable conduct led to the default suffices to deny reliefindependent of other factors). We think the better view is to condition relief from a default judgment, whether final or interlocutory, on a finding that the defaulting party did not act willfully. Before today, we have not clearly held that willfulness is a threshold inquiry, but we have implied as much. Campbell, 555 S.W.2d at 113 (The facts make out a case of mistake, inadvertence, or excusable neglect, rather than one of willful failure to appear.). Moreover, the Court of Appeals has recognized the incompatibility of willfulness and excusable neglect in several unpublished opinions. See, e.g., Hayes v. Hayes, No. M2006-02356-COA-R3-CV, 2007 WL 2580026, at  (Tenn.Ct. App. Sept. 6, 2007) (An attorney's negligence may constitute excusable neglect under Tenn. R. Civ. P. 60.02(1) so long as that conduct is not willful. (citing Henry, 104 S.W.3d at 481; Barbee, 689 S.W.2d at 866)). Thus, untimely filings or missed court dates may constitute excusable neglect when due to an attorney's carelessness or inattention. See, e.g., Barbee, 689 S.W.2d at 865 (counsel neglected to check mail); Campbell, 555 S.W.2d at 113 (counsel neglected to read notice). On the other hand, deliberate choices amount to willful conduct. Barber & McMurry, Inc. v. Top-Flite Dev. Corp., 720 S.W.2d 469, 471 (Tenn.Ct.App. 1986) (counsel chose not to attend trial due to scheduling conflict). Willfulness also includes conduct that is flagrant and unexplained. Hayes, 2007 WL 2580026, at  (citing Munday v. Brown, 617 S.W.2d 897 (Tenn.Ct.App. 1981)); see also McBride v. Webb, No. M2006-01631-COA-R3-CV, 2007 WL 2790681, at  (Tenn.Ct.App. Sept. 25, 2007) ([Defendant] read the summons and did nothing to respond to the Complaint as directed by the summons. This is willful conduct.). [25] The Munday case illustrates this concept. In Munday, involving a boundary dispute, the defendant's attorney made an appearance, raised the defense of adverse possession, and successfully opposed the plaintiff's request for a preliminary injunction. 617 S.W.2d at 898. A trial date was scheduled and rescheduled several times. Id. Defendant's counsel failed to appear at trial, despite having been served with various motions and orders during the interim. Id. While the defendant, through counsel, eventually moved to set aside the default judgment, she offered no explanation for why her attorney failed to appear at trial; rather, she argued that she personally lacked notice. Id. at 899. In upholding the trial court's denial of relief, the Court of Appeals noted that on no less than ten occasions counsel for the defendant was served with ample warning that if his client intended to further defend plaintiff's suit that action in that regard must be taken. Id. at 898. [26] Today we clarify that when a party seeks relief from a default judgment due to excusable neglect, whether pursuant to Rule 54.02 (for interlocutory judgments), Rule 59.04 (for final judgments within thirty days of entry), or Rule 60.02 (for final judgments more than thirty days after entry), a reviewing court must first determine whether the conduct precipitating the default was willful. If the court finds that the defaulting party has acted willfully, the judgment cannot be set aside on excusable neglect grounds, and the court need not consider the other factors. [27] If the conduct was not willful, however, then the court must consider whether the defaulting party has a meritorious defense and whether the non-defaulting party would be prejudiced by the granting of relief. The court may also consider any other factor that it deems relevant. We recognize that the interest in finality is heightened once a final judgment has been entered. While the same factors must guide the inquiry, relief from a partial default judgment may be granted more liberally under Rule 54.02 than relief from final default judgments under Rule 59.04 or Rule 60.02. Cf. Dayton Elec. Mfg. Co., 140 F.3d at 783 (holding that the same factors apply when relief is sought from a final judgment, Fed.R.Civ.P. 60(b), as from a mere entry of default, Fed.R.Civ.P. 55(c), but that relief should be granted more liberally where no final judgment has been entered).
Having determined that the same test for relief applies under Rule 54.02 and Rule 60.02, it follows that the trial court did not abuse its discretion by applying an incorrect legal standard. See Jordan, 325 S.W.3d at 39. We next determine whether the trial court abused its discretion by reaching an illogical conclusion, basing its decision on a clearly erroneous assessment of the evidence, or employing reasoning that caused an injustice to Discover. See Id. In making this determination, we will not substitute our judgment for that of the trial court, Henry, 104 S.W.3d at 479, and will uphold the trial court's ruling `so long as reasonable minds can disagree as to [the] propriety of the decision made.' Eldridge, 42 S.W.3d at 85 (quoting Scott, 33 S.W.3d at 752). We begin our analysis by considering the actions of Discover's attorney in this case. Discover contends that its original counsel acted negligently, not willfully, in failing to oppose default judgment. At the April 29, 2008 hearing, original counsel admitted that his office received proper service of the motion for default judgment, but that his staff had failed to forward it to him or calendar the hearing date. He also denied actual personal knowledge of the letter from Morgan's counsel, dated April 13, 2007, warning that Morgan would move for a default judgment unless Discover filed an answer within two weeks. This neglect, Discover argues, together with its original counsel's prompt motion to set aside the default judgment, warrants relief due to excusable neglect. [28] However, original counsel also admitted at the April 29, 2008 hearing that he had actual notice of the counter-complaint; indeed, he claimed to have discussed the matter with general counsel for Discover and sought a settlement with counsel for Morgan. Moreover, he requested, and received, a time extension in which to file an answer. The answer was not filed within the extension period and was more than a month overdue when Morgan moved for default judgment. Even then counsel failed to lodge a proposed answer with the Court. We are at a loss to understand how the alleged mishaps at original counsel's office, pertaining to the hearing on the motion for default judgment, can justify original counsel's failure to answer the counter-complaint until nine months after the entry of default judgment. At no time did original counsel explain why he waited so long to answer the countercomplaint not in his motion to set aside the default judgment, not in his amended motion to set aside the default judgment, and not even at the April 29, 2008 hearing. Except for vague references to the transcript of that hearing, Discover has still not explained why it took more than a year to answer the counter-complaint in an action it initiated. Finding no explanation in the record for this flagrant violation of procedural rules, we deem this conduct willful and therefore ineligible for relief on grounds of excusable neglect.