Hughes v. CoxHughes v. Cox
Gearlene HUGHES, d/b/a Hughes Realty and Hughes Realty of Clanton
v.
Ray K. COX, et al.
Supreme Court of Alabama.
*466 Robert A. Huffaker and Jack B. Hinton, Jr. of Rushton, Stakely, Johnston & Garrett, P.A., Montgomery, for appellant.
Bruce J. McKee of Hare, Wynn, Newell & Newton, Birmingham, for appellees.
PER CURIAM.
Gearlene Hughes appeals from a default judgment entered against her in the amount of $629,000. The trial court denied Hughes's motion to set aside the default judgment, and this appeal followed.[1] Hughes argues that the default judgment is void because the complaint named her sole proprietorship as a defendant, not her individually, and, in the alternative, that the trial court abused its discretion in denying her Rule 55(c), Ala.R.Civ.P., motion to set aside the default judgment.
The record before us supports the following general statement of the facts, although we note that Hughes has not submitted anything in opposition to the plaintiffs' evidence. In January 1986, Ray and Karen Cox purchased a house from Thomas and Judith Duke. Hughes Realty Company was the selling agent, and City Finance of Clanton financed the purchase for the Coxes. The Coxes moved into the house in February 1986 and, around June 1986, noticed standing water outside the house. The Coxes contacted a man to come to the house and clean out the septic tank; however, when the man attempted to pump out the tank, he discovered that there was, in fact, no septic tank. Instead, a 500-gallon gasoline tank had been buried in the ground. The top of the tank had rusted and water was bubbling out of the top onto the ground.
The Coxes then discovered a large accumulation of liquid under the house. The liquid was raw sewage, and it had been seeping from under the house into their house through the walls. The man who had come to the house to clean the tank told the Coxes that the land on which their house was situated would not percolate and that, therefore, a septic tank could not be installed. There was also no sewage system, because the house was located in a rural area of Chilton County.
The Coxes and their one-year-old son, Matthew, began developing boils on their skin while living in the house, and they continued to develop these boils after leaving the house. Mrs. Cox was pregnant at the time the boils started to develop, and the child of this pregnancy, born after the Coxes had moved out of the house, also developed the same type of boils. After seeking medical attention, the Coxes were told by their doctor that an infection of staphylococcus aureus (staph) was causing the boils on their skin. The Coxes were treated with antibiotics, and the doctor advised them to clean everything in the house with bleach. They followed the doctor's instructions; however, the boils continued. The doctor then advised them to move out of the house because he thought it very likely that the raw sewage was causing their staph infections. The Coxes left the house in June 1986 and have made no payments on the note since that time.
On October 10, 1986, the Coxes, individually and on behalf of their son Matthew, filed a complaint against City Finance, the Dukes, and "Hughes Realty of Clanton, Alabama." The complaint alleged negligence, *467 wantonness, and fraud and misrepresentation with regard to the condition of the house, the condition of the soil as to whether it would percolate, and the existence of a septic tank. City Finance counterclaimed, but, after discovery and negotiations, both the claim against it and its counterclaim were dismissed by agreement of the parties. In January 1990, the claims against the Dukes were also dismissed by consent of the parties, and "Hughes Realty of Clanton, Alabama," remained as the only defendant.
The Coxes moved for an entry of default against Hughes Realty and, on April 3, 1990, the circuit court entered a default and scheduled a hearing on damages. The court held that hearing on May 3 and entered the following on the case action summary sheet:
"Plaintiffs present with attorney, hearing on damages on default. Defendant['s] name amended to conform to proof & since service was had on Geraldine [sic] Hughes to reflect Defendant, Geraldine [sic] Hughes, d/b/a Hughes Realty Company. Oral order entered. Written judgment to follow."
On June 27, 1990, the Coxes amended their complaint and substituted "Gearlene Hughes, d/b/a Hughes Realty or[2] Hughes Realty of Clanton" for "Hughes Realty of Clanton, Alabama" as the defendant. Service of the original summons and complaint had been made at the business premises of Hughes Realty and had been personally accepted by Gearlene Hughes. Similarly, a first amended complaint had been served on Hughes. However, Hughes was not served with a copy of the amended complaint naming her individually. The court entered a default judgment against Hughes on September 14, 1990, awarding $4,000 compensatory damages to Matthew Cox, through his father; $100,000 compensatory and $175,000 punitive damages to Ray Cox; and $150,000 compensatory and $200,000 punitive damages to Karen Cox.
On September 20, 1990, Hughes filed a motion to set aside the default judgment.[3] On November 1, the trial court held a hearing on that motion and, on December 21, 1990, entered an order denying it.[4] A notice of appeal was filed on February 1, 1991. The record was supplemented in August 1991 to reflect the timeliness of the order denying the post-trial motion, and the appeal was submitted thereafter.
Hughes argued in her motion to set aside the default judgment that, because the original summons and complaint had named "Hughes Realty of Clanton" as the defendant, without indicating whether Hughes Realty was a sole proprietorship, a partnership, or a corporation, she had no notice of being included as a defendant in this action. Hughes contends that because the action was not filed against a suable entity, but only against a trade name under which she did business, the complaint did not name her as a defendant. Hughes further argues that the Coxes' amendment to the complaint substituting "Gearlene Hughes, d/b/a Hughes Realty or Hughes Realty of Clanton," for "Hughes Realty of Clanton," was not sufficient to give her notice that she was a defendant in the action because she was never served a copy of the amended complaint. She contends that, for these reasons, the court never acquired jurisdiction over her and the judgment against her is void.
For a judgment to be void, the court rendering the judgment must have *468 lacked jurisdiction of the subject matter or of the parties, or have acted in a manner that was inconsistent with due process. Smith v. Clark,
Hughes contends that the trial court lacked personal jurisdiction over her and further argues that May v. Clanton,
"The record of the former action showed no judgment against the plaintiff in this. Plaintiff was not named as a defendant and there could be no judgment against him. This results, we think, from familiar principles. Had the former suit been brought against a suable entity, perhaps parol evidence would have been admissible to show his identity with this plaintiff. Tarleton v. Pollard,25 Ala. 300 , 60 Am.Dec. 515. But it does not appear that Home Steam Laundry was a suable entity. Home Steam Laundry was, we may assume, merely the name of a business conducted by plaintiff. Plaintiff was liable for all obligations incurred in the prosecution of that business; but, to enforce any such obligation, suit should have been brought against plaintiff in the only name by which he appears to have been known."
May,
The holding in May, however, is contrary to the principles of pleading established by the Alabama Rules of Civil Procedure. "These rules shall be construed to secure the just, speedy and inexpensive determination of every action." Rule 1(c). "When a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend as provided by these rules and that fact is made to appear by affidavit or otherwise, the clerk shall enter his default," Rule 55(a), and the court proceeds under Rule 55(b) to enter a default judgment. "The adoption of the Alabama Rules of Civil Procedure was accompanied by the abolition of the harsh rules of pleading that had been followed by our courts." Williams v. Kasal,
The Rules of Civil Procedure are designed to give fair notice of the claim against the defendant. Simpson v. Jones,
There is, moreover, a line of cases that is in conflict with May v. Clanton, supra. That line of cases begins with Ex parte Nicrosi,
"[T]he Roswald Grocery Company, whatever it was, whether a partnership, a corporation, or an individual, assuming the name for the purposes of trade, was the party against whom or which the suit was instituted, has all along been prosecuted, and will be continued if and when the amendments moved for are allowed. There is, in other words, no question here as to the identity of the defendant, throughout all the proceedings which have been or may, in any proposed event, be had, being originally and at all times the same in the mind of the plaintiff. The entity which entered into the rental contract, which has enjoyed the shelter of plaintiff's house, which has failed to pay the agreed price therefor, and which is sought in this action to be coerced into payment thereof, is one and the same, whether it be a contractual entitya partnership, an artificial entitya corporation, or a personal entityan individual; and whether one or another of these entities, its name is the same'The Roswald Grocery Company'; and its liability is the same and enforceable by the same remedies. That entity, whatever its character or the source or manner of its being, was proceeded against originally in this case and brought before the court by attachment of its property. Once there, it was found that a mistake had been made, not as to the entity itself not as to the party suedbut merely in respect of describing what kind of an entity the party defendant was."
Id.,
By the Court's reasoning in Nicrosi, a complaint or a judgment against the Hughes Realty Company would be a complaint or a judgment against whatever entity was doing business in that name. Nicrosi has been followed by numerous other cases. For example, in First National Bank of Thomasville v. Gobey,
In Manistee Mill Co. v. Hobdy,
In Springer v. Sullivan,
Under the rule of the Nicrosi line of cases, the change from Hughes Realty of Clanton to Gearlene Hughes, d/b/a Hughes Realty did not work a change of the party defendant. As in Nicrosi, the Coxes had merely misdescribed the party with regard to its status. The fact that they did not refer to it as a corporation or a partnership in the original complaint does not distinguish this case from Nicrosi. There was no question as to the identity of the defendant, because Hughes Realty was merely the name under which Hughes did business, and as the sole proprietor she "own[ed] all the assets of the business ... [and was] solely liable for all the debts of the business." Black's Law Dictionary 1392 (6th ed. 1990). The change in the present case was also only "a matter of description ... which [did] not affect the identity of the party sought to be described, but only [gave] accuracy and certainty to it." Nicrosi,
The purpose of service is to notify the defendant of the action that is being brought against him. Goodall v. Ponderosa Estates, Inc.,
In DaLee v. Crosby Lumber Co.,
"`It is the duty of every party desiring to resist an action or to participate in a judicial proceeding to take timely and adequate steps to retain counsel or to act in his own person to avoid an undesirable judgment. Unless in arranging for his defense he shows that he has exercised *471 such reasonable diligence as a man of ordinary prudence usually bestows upon important business, his motion to set aside a judgment for default should be denied. Little v. Peevy, [238 Ala. 106 ,189 So. 720 (Ala.1939) ].
"`Courts cannot act as guardian for parties who are grossly careless of their own affairs. All must be governed by the laws in force, universally applied, according to the showing made.
"`If judgment be entered against a party in his absence, before he can be relieved of the judgment he must show that it was the result of a mistake or inadvertence which reasonable care could not have avoided, a surprise which reasonable precaution could not have prevented, or a negligence which reasonable prudence could not have anticipated.'"
DaLee, supra,
DaLee is not squarely on point with this case, because Ray DaLee was served with a complaint that named him individually as a defendant. Thus, he did not make the jurisdictional argument now made by Hughes, but argued only that he should not be held liable for the corporate debt and that he should be relieved from the default judgment under Rule 60(b)(1). Nevertheless, DaLee's reasoning is persuasive on the point that one doing business in a trade name has fair notice that a complaint alleging a cause of action arising out of his business may lead to personal liability.
In United States v. A.H. Fischer Lumber Co.,
"A suit at law is not a children's game but a serious effort on the part of adult human beings to administer justice; and the purpose of process is to bring parties into court. If it names them in such terms that every intelligent person understands what is meant ... it has fulfilled its purpose; and courts should not put themselves in the position of failing to recognize what is apparent to everyone else."
The trial judge's order denying Hughes's motion to set aside the default judgment stated that Gearlene Hughes knew or should have known that she was required to appear and defend the action when she was personally served with the original complaint against Hughes Realty of Clanton. Because Hughes was the sole proprietor of Hughes Realty and because she personally accepted service of the summons and complaint, she was sufficiently apprised of the fact that she was being sued for actions taken in the course of her business, and the failure to serve Hughes the amended complaint did not deny the trial court jurisdiction over her.
Under this Court's holding in May v. Clanton, however, a default judgment entered against a trade name was void. That rule was impliedly overruled by the later cases in the Nicrosi line of cases, and particularly by the adoption of the modern pleading rules in the Rules of Civil Procedure. Certainly, given the developments in the law over the 70 years since this Court decided May, and the law prevailing at the time Hughes received service in this action, she could not reasonably have relied on May to believe that she would not be subject to liability if the action naming her sole proprietorship as a defendant proceeded to a default judgment. Having considered the question fully, we affirmatively hold that a judgment entered against a trade name is a judgment against the individual doing business under that trade name, at least so long as the individual was personally served with the complaint. Absent a statute to the contrary, an individual has the right to be known by any name that he chooses, and a judgment entered for or against that individual in either an assumed name or a trade name is valid. See 49 C.J.S. Judgments § 75, p. 197 (1947).
The law of other jurisdictions supports the proposition that a judgment rendered against a person in an assumed name or trade name is not void. In Eslinger v. Herndon,
In McCall v. Kliros,
In Janove v. Bacon,
In Aman Collection Service, Inc. v. Burgess,
The court of appeals affirmed the lower court's decision and held that when a "party defendant is personally served with process, even though in the wrong name, he is obligated to appear and call attention to the defect. If he fails to do so and allows judgment to go against him by default, the misnomer is waived." Id. at 408. The court also stated that "[w]hen summons is actually served on the right individual by the wrong name, the error becomes immaterial because he has notice of the suit, and may appear if he choose and plead a misnomer." Id. (quoting Ohlmann v. Clarkson Sawmill Co.,
To the extent that May v. Clanton,
Hughes also challenged the default judgment on the ground that the trial court abused its discretion in denying Hughes's motion to set aside the default judgment pursuant to Rule 55(c), Ala. R.Civ.P. That rule vests a trial judge with broad discretionary authority when determining whether to set aside a default judgment. Kirtland v. Fort Morgan Authority Sewer Service, Inc.,
In Kirtland, supra, this Court established three factors that a trial court should consider when exercising its broad discretionary authority under Rule 55(c). This three-factor analysis is applicable to the present case and is set out in Kirtland as follows:
"1) whether the defendant has a meritorious defense;
"2) whether the plaintiff will be unfairly prejudiced if the default judgment is set aside; and
"3) whether the default judgment was a result of the defendant's own culpable conduct."
Kirtland,
For the reasons discussed above, Hughes's argument that the complaint did not name her as a defendant does not present a meritorious defense. This argument was the only basis for her motion to set aside the default judgment. In her brief on appeal she makes arguments directed to the merits of the fraud claim, but, because these arguments were not presented to the trial court, they present no basis on which to reverse the denial of the Rule 55(c) motion. See DaLee, supra; Kirtland, supra. Because Hughes has not shown a meritorious defense, the trial court did not err in denying the motion to set aside the default judgment insofar as the motion may be considered a Rule 55(c) motion.
Because there was no error in denying the motion, either insofar as it attacked the judgment as void or insofar as it invoked the trial court's exercise of its discretion under Rule 55(c), the judgment is affirmed. May v. Clanton,
AFFIRMED.
*474 HORNSBY, C.J., and MADDOX, ALMON, SHORES, KENNEDY and INGRAM, JJ., concur.
HOUSTON and STEAGALL, JJ., dissent.
HOUSTON, Justice (dissenting).
If this suit had been filed against "Gearlene Hughes, d/b/a Hughes Realty of Clanton, Alabama," and a summons and complaint had been served on Gearlene Hughes, I would vote to affirm this judgment on the authority of DaLee v. Crosby Lumber Co.,
Hereafter, the principle announced in DaLee v. Crosby Lumber Co., supra, may apply if an individual is sued in the trade name under which he or she conducts his or her business. However, I am not persuaded that the point has been reached in the case at issue where the interest of the court in controlling its calendar and the interest in preventing risk to the plaintiffs outweigh the interest of disposing of the litigation on the merits. See Nash v. Cosby,
Therefore, I dissent.
NOTES
Notes
[1] Hughes's appellate counsel is not the same as her trial counsel who filed the motion to set aside the default judgment.
[2] Later filings, including the notice of appeal, have used "and" instead of "or."
[3] Insofar as that motion argued that the default judgment was void, we will construe it as a motion under Rule 60(b)(4), Ala.R.Civ.P.; insofar as it sought to have the default judgment set aside on other grounds, we will construe it as a motion under Rule 55(c), Ala.R.Civ.P.
[4] At the November 1 hearing the Coxes and Hughes expressly agreed to extend the 90-day period under Rule 59.1, Ala.R.Civ.P., to allow the trial judge to defer ruling on Hughes's post-judgment motion while the parties attempted to reach a settlement. Sometime after December 3, 1990, the parties informed the trial judge that they were unable to reach a settlement, and he ruled on the motion on December 21, 1990. Although this order was entered 92 days after Hughes's motion was filed on September 20, 1990, the December 21 order was not untimely, because the parties had expressly consented to an extension of time under Rule 59.1.
[5] But see Deason v. Alpine Coal Co.,