Court Opinion

ID: 9897298
Source: CourtListenerOpinion
Date Created: 2023-11-14 19:09:50.548059+00
Date Added: 2024-06-11T09:16:42.897130
License: Public Domain

FILED
                                                                      Aug 31 2023, 8:48 am

                                                                          CLERK
                                                                      Indiana Supreme Court
                                                                         Court of Appeals
                                                                           and Tax Court

ATTORNEY FOR APPELLANT                                     ATTORNEYS FOR APPELLEE
Jonathan W. Slagh                                          Blake Bower
Hunt Suedhoff Kearney, LLP                                 Corey Meridew
South Bend, Indiana                                        Camden & Meridew, P.C.
                                                           Fishers, Indiana

                                            IN THE
    COURT OF APPEALS OF INDIANA

On the Level Fence & Deck,                                 August 31, 2023
Inc.,                                                      Court of Appeals Case No.
Appellant-Defendant,                                       22A-CT-3073
                                                           Appeal from the
        v.                                                 Lake Superior Court
                                                           The Honorable
Indiana Bell Telephone                                     John M. Sedia, Judge
Company d/b/a AT&T Indiana,                                Trial Court Cause No.
Appellee-Plaintiff                                         45D01-2207-CT-701

                                Opinion by Judge Vaidik
                                 Judge Tavitas concurs.
                        Judge Foley dissents with separate opinion.

Vaidik, Judge.

Court of Appeals of Indiana | Opinion 22A-CT-3073 | August 31, 2023                           Page 1 of 9
      Case Summary
[1]   During a fence project, On the Level Fence & Deck, Inc. (“On the Level”)

      damaged utility lines owned by Indiana Bell Telephone Company d/b/a AT&T

      Indiana (“AT&T”). AT&T sued On the Level and obtained a default judgment

      after On the Level failed to answer the complaint. The next month, On the

      Level moved to have the default judgment set aside under Trial Rule 60(B)(1),

      arguing that it believed its insurer knew about and was dealing with the lawsuit

      because AT&T had been communicating directly with the insurer before filing

      suit. The trial court denied the motion. Concluding that On the Level’s failure

      to answer the complaint was the result of excusable neglect, we reverse and

      remand.

      Facts and Procedural History
[2]   In July 2020, On the Level was digging holes for a fence at a home in Crown

      Point when it damaged underground utility lines owned by AT&T. On July 19,

      2022, AT&T sued On the Level, alleging negligence, trespass, and statutory

      violations. On the Level didn’t answer the complaint, and on August 19, AT&T

      moved for default judgment. Three days later, on August 22, the trial court

      granted AT&T’s motion and entered a default judgment against On the Level in

      the amount of $12,130.83.

[3]   Two-and-a-half weeks later, on September 9, an attorney for On the Level

      called AT&T’s counsel and left a voicemail about the default judgment. On

      Court of Appeals of Indiana | Opinion 22A-CT-3073 | August 31, 2023     Page 2 of 9
      September 22, another attorney who had been retained by On the Level’s

      insurer wrote to AT&T’s counsel explaining that On the Level “mistakenly

      believed that the insurance company was aware of the suit” and that “it is likely

      that insurance coverage may be denied based upon the default judgment being

      entered.” Appellant’s App. Vol. II p. 75. The letter asked AT&T to agree to

      vacate the default judgment.

[4]   AT&T rejected that request, so on September 28 On the Level moved to set

      aside the default judgment under Trial Rule 60(B)(1). On the Level argued that

      it failed to answer the complaint as a result of excusable neglect. In its motion,

      On the Level stated it believed its insurer “was aware of the Complaint and

      Summons and was in the process of handling same by hiring counsel for it.” Id.

      at 42. On the Level also alleged the following as a meritorious defense:

              [On the Level] was not able to see the lines marked by [AT&T]
              that had been done prior to the excavation. The markings had
              been eliminated by the homeowner mowing their grass or by the
              weather conditions themselves. Either way, the markings were
              not visible to [On the Level] at the time excavation commenced
              and therefore [On the Level] was unaware of any underground
              lines buried by [AT&T].

      Id. at 43.

[5]   In response, AT&T argued that On the Level had no reason to believe that its

      insurer “would have notice of the lawsuit or complaint without On the Level

      communicating that information or providing a copy of it to the insurance

      company.” Id. at 51. In its written reply, On the Level explained that AT&T

      Court of Appeals of Indiana | Opinion 22A-CT-3073 | August 31, 2023        Page 3 of 9
      was communicating directly with On the Level’s insurer before filing suit and

      argued that it reasonably assumed the insurer “would handle the matters as

      they had handled all of the matters up to that point.” Id. at 109.

[6]   The trial court heard oral arguments on the motion to set aside. AT&T’s

      attorney did not dispute that AT&T had been communicating directly with On

      the Level’s insurer before filing suit.1 Nonetheless, the court denied On the

      Level’s motion. The court found that On the Level “appears” to have a

      meritorious defense but had not shown excusable neglect. Id. at 114-15.

[7]   On the Level now appeals.

      Discussion and Decision
[8]   On the Level challenges the trial court’s denial of its motion to set aside the

      default judgment. As the parties note, our Supreme Court has said that a trial

      court’s ruling on such a motion is entitled to “substantial deference” and will be

      reversed only for an abuse of discretion. Huntington Nat’l Bank v. Car-X Assocs.

      Corp., 39 N.E.3d 652, 655 (Ind. 2015). But the Court has also said that where,

      as here, a trial court rules on a Trial Rule 60(B) motion based on a paper record

      and argument from counsel, without an evidentiary hearing, the appellate court

      “in as good a position as the trial court to determine the force and effect of the

      1
       On the Level did not submit any documentary evidence of this pre-suit communication, but AT&T has
      never disputed that the communication occurred.

      Court of Appeals of Indiana | Opinion 22A-CT-3073 | August 31, 2023                         Page 4 of 9
       evidence,” and the review is de novo. In re Adoption of C.B.M., 992 N.E.2d 687,

       691 (Ind. 2013); see also Holland v. Trs. of Ind. Univ., 171 N.E.3d 684, 688 (Ind.

       Ct. App. 2021), reh’g denied, trans. denied. When the trial court does not hold an

       evidentiary hearing and judge witness credibility, de novo review is appropriate.

       But even applying the abuse-of-discretion standard cited by the parties, we

       conclude the trial court’s decision should be reversed.

[9]    “Indiana law strongly prefers disposition of cases on their merits.” Coslett v.

       Weddle Brothers Constr. Co., 798 N.E.2d 859, 861 (Ind. 2003), reh’g denied.

       Therefore, a trial court considering a motion to set aside a default judgment

       “must balance the need for an efficient judicial system with the judicial

       preference for deciding disputes on the merits.” Baker v. Paschen, 188 N.E.3d

       486, 491 (Ind. Ct. App. 2022), reh’g denied, trans. denied. That said, because a

       default judgment is generally disfavored, any doubt as to its propriety must be

       resolved in favor of the defaulted party. Coslett, 798 N.E.2d at 861.

[10]   On the Level moved to set aside the default judgment under Trial Rule

       60(B)(1), which provides that a judgment may be set aside based on a party’s

       “mistake, surprise, or excusable neglect” if the motion is filed within one year

       of the judgment and the moving party alleges “a meritorious claim or defense.”

       On the Level filed its motion well within a year of the default judgment—just

       over a month after the judgment was entered. And the trial court found that On

       the Level adequately alleged a meritorious defense, a finding AT&T does not

       challenge on appeal. Therefore, the only issue before us is whether On the Level

       showed that its failure to answer AT&T’s complaint was the result of “mistake,

       Court of Appeals of Indiana | Opinion 22A-CT-3073 | August 31, 2023         Page 5 of 9
       surprise, or excusable neglect.” On the Level’s brief mentions both mistake and

       excusable neglect, but its discussion focuses on excusable neglect. “Because

       there is no general rule as to what constitutes excusable neglect under Trial

       Rule 60(B)(1), each case must be determined on its particular facts.” Huntington

       Nat’l Bank, 39 N.E.3d at 655 (cleaned up).

[11]   On the Level argues, as it did in the trial court, that because AT&T was

       communicating directly with On the Level’s insurer before filing suit, On the

       Level reasonably believed that its insurer would (1) know about the lawsuit and

       (2) continue handling matters as it had been up to that point. The trial court did

       not address this argument in its order, and AT&T does not respond to it on

       appeal. Under the circumstances, we agree with On the Level that its failure to

       contact its insurer after being served with the complaint amounts to excusable

       neglect. To be sure, On the Level should have contacted its insurer out of an

       abundance of caution. But by all indications, On the Level, a fence and deck

       company, is not a sophisticated party with significant litigation experience. Cf.

       Huntington Nat’l Bank, 39 N.E.3d at 658 (“A savvy, sophisticated bank

       exceedingly familiar with foreclosure actions that fails to respond to a

       complaint and summons for no reason other than an employee’s disregard of

       the mail cannot successfully allege a breakdown in communication sufficient to

       establish excusable neglect.”). Therefore, it was reasonable for On the Level to

       believe that AT&T would continue communicating directly with On the Level’s

       insurer after filing suit and that the insurer had things under control.

       Court of Appeals of Indiana | Opinion 22A-CT-3073 | August 31, 2023        Page 6 of 9
[12]   Balancing the efficiency interests underlying default judgments against our

       preference for deciding cases on the merits and On the Level’s reasonable

       explanation for not answering the complaint, we conclude the motion to set

       aside should have been granted whether the standard of review is de novo or

       abuse of discretion. We reverse the denial of the motion and remand this matter

       to the trial court for further proceedings on the merits of AT&T’s complaint.

[13]   Reversed and remanded.

       Tavitas, J., concurs.

       Foley, J., dissents with separate opinion.

       Court of Appeals of Indiana | Opinion 22A-CT-3073 | August 31, 2023     Page 7 of 9
       Foley, Judge, dissenting.

[14]   I respectfully dissent and would affirm the trial court’s denial of the motion to

       set aside the default judgment. I agree with the trial court that On the Level

       failed in meeting its burden of demonstrating excusable neglect.

[15]   The parties extensively briefed the issues to the trial court, appeared for oral

       argument, and then the trial court issued its order denying On the Level’s

       motion, stating as follows:

               Although it appears that On The Level has a meritorious defense,
               its mere assertion that:

                        . . . [W]hile On the Level Fence & Deck Inc. did receive
                        service of the complaint and subsequent documents,
                        mistakes and excusable neglect resulted in On the Level
                        Fence & Deck Inc.’s failure to notify its insurance
                        company of the pending action or to otherwise retain an
                        attorney to appear on its behalf until after the entry of
                        default judgment, On The Level Memorandum In Support of
                        Motion To Set Aside Default judgment, page 1.

               is insufficient to overcome its burden as a defaulted party that it
               was not at fault for a breakdown in communication. Nothing was
               put forward by On The Level that a subsequent breakdown in
               communication in the inner workings of its carrier caused a
               failure to respond to the Complaint and resulted in a default
               judgment. On The Level simply states that it failed to notify its
               insurance company or hire an attorney to defend the lawsuit. As
               the Indiana Supreme Court aptly pointed out in Smith [v. Johnson,
               711 N.E.2d 1259 (Ind. 1999)]:

       Court of Appeals of Indiana | Opinion 22A-CT-3073 | August 31, 2023          Page 8 of 9
                        This is neglect, but not excusable neglect. . . . The judicial
                        system cannot allow its processes to be stymied by simple
                        inattention. [Id.] at 1261.

[16]   The majority concludes that it was reasonable for On the Level to believe that

       the insurer was both aware of the suit and would respond to the suit on its

       behalf because the insurer had previously engaged in direct negotiations with

       AT&T in an attempt to settle the claim. Despite its burden, On the Level failed

       to present any evidence or testimony, either from the insurer or its owners or

       employees, regarding what communications On the Level had with its insurer

       and why it failed to take any action in response to the suit. In my view, the

       record is insufficient to support the conclusion that On the Level’s assumption

       was reasonable and therefore represented a breakdown in communication not

       of its own making.

[17]   I am not unmindful that the balancing of judicial efficiency against the

       preference for deciding cases on their merits, as identified by the majority, may

       tilt in On the Level’s favor. Nonetheless, I believe On the Level failed to meet

       its factual burden to demonstrate excusable neglect. It is my opinion that

       reversal on this record would dilute the distinction between neglect and

       excusable neglect as to effectively eliminate it. I would affirm the trial court’s

       denial of On the Level’s motion to set aside the default judgment.

       Court of Appeals of Indiana | Opinion 22A-CT-3073 | August 31, 2023               Page 9 of 9