Ann F. MCCLURG and Steve McClurg, Respondents, v. Harrell Wayne DEATON, and New Prime, Inc., Appellants.
No. 4458.
Court of Appeals of South Carolina.
Decided Nov. 20, 2008.
Rehearing Denied Jan. 27, 2009.
671 S.E.2d 87
Heard Oct. 8, 2008.
CONCLUSION
The circuit court‘s grant of summary judgment on all Gauld‘s claims is
AFFIRMED.
HUFF and THOMAS, JJ., concur.
Donald R. Moorehead, of Greenville, and Cynthia B. Patterson, of Columbia, for Respondents.
Harrell Wayne Deaton and New Prime, Inc. appeal from an order of the trial court denying their motions to set aside a default judgment in favor of Ann F. and Steve McClurg in the amount of $800,000. We affirm.
FACTUAL/PROCEDURAL HISTORY
Ann McClurg, along with her husband Steve, instituted this action for injuries Ann received as a passenger in a car involved in an August 5, 2002 motor vehicle accident with a truck owned by New Prime and driven by New Prime‘s employee, Deaton. New Prime was insured by Zurich North America under a commercial trucker‘s general liability policy containing a $2,000,000 deductible endorsement for liability claims for each accident. Zurich was notified of the accident almost immediately and began investigating the matter shortly thereafter.
In the following month of September 2002, Zurich received a letter of representation from the McClurgs’ counsel, beginning a course of contact between Zurich and counsel regarding injuries, medical treatment and settlement negotiations. Deaton left the employment of New Prime in October 2002, a little over two months following the accident, and there was no record of any communication between Deaton and New Prime during this time of negotiation subsequent to Deaton‘s separation from employment. On April 23, 2004, Zurich received a proposed settlement package from counsel. On June 28, 2004, counsel sent Zurich a letter regarding “Ann D. McClurg and Steve McClurg v. New Prime and Harrell Wayne Deaton.” The letter requested settlement within the next week and stated, “If I haven‘t heard from you by that time, I will file suit and serve the Defendant and send you a courtesy copy of the pleadings.” On October 6, 2004, counsel sent Zurich another letter, enclosing a copy of a complaint he prepared in the matter and indicating his intent to “proceed to litigation” if the matter was not soon settled. The draft complaint named only Ann McClurg as a plaintiff and New Prime as a defendant, and alleged New Prime was vicariously liable for Deaton‘s actions and was also liable for its negligent hiring, retention, and training of Deaton. On October 18, 2004,
Unbeknownst to Zurich and New Prime, counsel filed a summons and complaint on April 27, 2005, naming only Deaton as a defendant. The complaint was filed on behalf of Ann McClurg, for injuries sustained in the accident, and her husband Steve, for loss of consortium. On May 3, 2005, the South Carolina Department of Motor Vehicles (the Department) received a copy of the summons and complaint pursuant to
On October 5, 2005, Zurich contacted counsel‘s office to determine the status of the settlement negotiations. After counsel‘s staff would not divulge any information, Zurich contacted New Prime to confirm New Prime had not been served with a summons and complaint in the matter. On October 7, 2005, Zurich received by certified mail a copy of the default judgment entered against Deaton. After the services of several private investigators were engaged, Deaton was finally located on January 23, 2006. On that date, Deaton executed an affidavit denying he was served with a copy of the summons and complaint, or received notice of the entry of default or the default judgment hearing, and stating he did not notify
Deaton moved to set aside the default judgment pursuant to Rules 60(b)(1) and 60(b)(3) of the South Carolina Rules of Civil Procedure. New Prime filed a motion to intervene and likewise moved to set aside the judgment pursuant to Rules 60(b)(1) and 60(b)(3). The trial court granted New Prime‘s motion to intervene, but denied both New Prime‘s and Deaton‘s motions to set aside the default judgment. Both New Prime and Deaton made motions for reconsideration pursuant to Rule 59(e), SCRCP, which the trial judge denied with the exception of deleting some language from the order not at issue in this appeal. This appeal followed.
ISSUES
A. New Prime‘s Appeal
- Did the trial court err in failing to recognize New Prime‘s status as a party and afford New Prime due process rights?
- Did the trial court commit an abuse of discretion in denying New Prime relief from judgment based on surprise?
- Did the trial court commit an abuse of discretion in denying New Prime relief from judgment based on misrepresentation and misconduct by Respondents’ attorney?
B. Deaton‘s Appeal
- Did the trial court err in failing to set aside the default judgment when it was procured based on fraud, misrepresentation, or other misconduct inasmuch as Respondents’ counsel actively concealed the lawsuit so no defense would be entered?
- Did the trial court err in failing to set aside the default judgment under Rule 60, SCRCP, when Deaton demonstrated that he was not properly served with the summons and complaint and that he did not receive notice of the hearing on unliquidated damages?
- Should the default judgment be set aside because the actual judgment entered was incongruent with the damages alleged in the pleadings?
STANDARD OF REVIEW
The decision to grant or deny a motion for relief from judgment lies within the sound discretion of the trial court and will not be disturbed on appeal absent an abuse of discretion. BB & T v. Taylor, 369 S.C. 548, 551, 633 S.E.2d 501, 502-03 (2006). Thus, our standard of review limits this court to determining whether the trial court abused its discretion. Id. “An abuse of discretion arises where the judge issuing the order was controlled by an error of law or where the order is based on factual conclusions that are without evidentiary support.” Id. at 551, 633 S.E.2d at 503
LAW/ANALYSIS
A. New Prime‘s Appeal
New Prime contends the trial court erred in failing to recognize its status as a party to the action after the court granted its motion to intervene, and denying New Prime relief on this basis. We agree. Nonetheless, we find the order denying New Prime‘s motion to set aside judgment must be affirmed on other grounds.
New Prime presented evidence that, based upon a federally mandated MCS-90 Endorsement contained in the applicable insurance policy, any noncooperation/late notice defense which might have been available due to Deaton‘s failure to notify New Prime of the lawsuit could be completely eliminated, thereby leaving New Prime vulnerable to being responsible for the entire judgment. The trial court granted New Prime‘s motion to intervene, recognizing New Prime‘s large financial interest in the action and possible responsibility for paying the judgment. Despite this determination by the trial court, it
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;
...
(3) fraud, misrepresentation, or other misconduct of an adverse party.
New Prime was clearly made a party to the action based upon the court‘s decision to grant its motion to intervene. Therefore, as a party, it was within the trial court‘s discretion to grant New Prime relief from the final judgment entered if the relief was warranted. Further, the case of Edwards v. Ferguson, 254 S.C. 278, 175 S.E.2d 224 (1970) indicates an insurer may, under the proper circumstances, be entitled to an order setting aside a default judgment where the insurer is involved in ongoing negotiations with a claimant but is not informed that the defendant has been served with a summons and complaint.
In Edwards, Ferguson and his liability insurer, State Farm Mutual Automobile Insurance Company, moved to set aside a personal injury default judgment on the ground that the same
Here, it is undisputed Zurich, as New Prime‘s insurer, entered into settlement negotiations with the McClurgs’ attorney. In June 2004, counsel sent Zurich a letter in regard to “Ann D. McClurg and Steve McClurg v. New Prime and Harrell Wayne Deaton,” thus indicating an intention to file suit against both Deaton and New Prime. The letter further requested settlement within the next week and stated counsel
Based on counsel‘s conduct and actions, it was reasonable for Zurich and New Prime to believe that any suit filed would include New Prime as a defendant or, at the very least, that counsel would provide Zurich a copy of any pleadings in the matter when filed. Thus, at a minimum, the facts show New Prime was taken by surprise when counsel filed the action solely against Deaton and failed to inform Zurich or New Prime of this action, thereby meeting the surprise or excusable neglect requirement under
Our courts have noted, in determining whether to set aside a default judgment under Rule 60(b), the trial judge should consider the following relevant factors: (1) the promptness with which relief is sought, (2) the reasons for the failure to act promptly, (3) the existence of a meritorious defense, and (4) the prejudice to the other parties. Tobias v. Rice, 379 S.C. 357, 366, 665 S.E.2d 216, 221 (Ct.App.2008); Mictronics, Inc.
To establish that he has a meritorious defense, a complainant need not show that he would prevail on the merits, but only that his defense is meritorious. Thompson v. Hammond, 299 S.C. 116, 120, 382 S.E.2d 900, 903 (1989). [A] meritorious defense need not be perfect nor one which can be guaranteed to prevail at a trial. It need be only one which is worthy of a hearing or judicial inquiry because it raises a question of law deserving of some investigation and discussion or a real controversy as to real facts arising from conflicting or doubtful evidence. Id. (quoting Graham v. Town of Loris, 272 S.C. 442, 248 S.E.2d 594 (1978)). A party making a motion under Rule 60(b) has the burden of presenting evidence proving the facts essential to entitle him to relief. Bowers v. Bowers, 304 S.C. 65, 67, 403 S.E.2d 127, 129 (Ct.App.1991).
Here, as noted by the trial court, New Prime has failed to make any showing of a meritorious defense. There is no evidence of record, by affidavit or otherwise, to suggest that the accident was the result of anything other than Deaton‘s negligence. In fact, a review of the record shows New Prime never even raised the issue of a meritorious defense before the trial court. New Prime argues on appeal that it presented compelling evidence of a meritorious defense as to damages based on a judgment award of $800,000 and the fact that the McClurgs had earlier offered to settle the matter for a total of $170,000. A review of the record shows merely an allegation in a Zurich employee affidavit regarding a $170,000 settlement
Because New Prime failed to make the necessary prima facie showing of a meritorious defense required to set aside a judgment under Rules 60(b)(1) and 60(b)(3), the trial court did not commit reversible error in refusing to set aside the default judgment.
B. Deaton‘s Appeal
Deaton first contends the trial court erred in failing to set aside the default judgment pursuant to Rule 60(b)(3) when it was procured through fraud, misrepresentation, or other misconduct. He maintains that counsel for the McClurgs agreed to notify Zurich of a lawsuit, but breached that agreement, ensuring Zurich would have no reason to hire counsel for him. He also points to counsel‘s negotiations and communications with Zurich, and the settlement demands made to Zurich over the course of time. Deaton asserts the tactics employed by the McClurgs’ attorney were undertaken for the purpose of evading full and fair litigation of the case on the merits. However, Deaton fails to show how counsel‘s actions and inactions toward Zurich would equate to fraud, misrepresentation, or other misconduct toward Deaton. As noted by the trial court, there is simply no evidence the McClurgs’ counsel committed any kind of fraud that deprived Deaton of the opportunity to be present or heard in the matter, or that counsel made any misrepresentations to Deaton or engaged in any misconduct toward Deaton. At any rate, Deaton‘s argu-
Deaton next maintains the trial court erred in failing to set aside the default judgment under Rule 60, SCRCP, as he “unequivocally demonstrated he was not properly served with the summons and complaint,” and did not receive notice of the damages hearing. He asserts, while the McClurgs claim he was properly served pursuant to South Carolina Code Ann. §§ 15-9-350 and 370, Deaton presented evidence by way of his affidavit that he never received the summons and complaint or notice of the damages hearing. He maintains the trial court failed to liberally apply Rule 60(b)(1), SCRCP and ignored Deaton‘s affidavit because there was not “conclusive proof” that the signature on the return receipt was that of Deaton‘s. We disagree.
In ruling on Deaton‘s motion to vacate pursuant to Rule 60(b)(1), the trial court found “Deaton received the Summons and Complaint on June 27, 2005 as evidenced by the signed return-receipt.” The trial court noted the return receipt has both the signature and the printed name of “Wayne Deaton.” Although Deaton‘s affidavit states he had not been served with the summons and complaint, implying the signature was not his, the trial court noted Deaton‘s affidavit failed to indicate that he resided at a different address than that used for service at the time of service. The court determined Deaton had failed to provide the court with “conclusive proof” that the signature on the return receipt was not his. Accordingly, the court held Deaton‘s reason for his failure to answer the summons and complaint, in light of the evidence produced, did not amount to excusable neglect under Rule 60(b)(1), SCRCP.
The acceptance by a nonresident of the rights and privileges conferred by the laws in force in this State permitting the operation of motor vehicles, as evidenced by the operation of a motor vehicle by such nonresident on the public highways, the streets of any incorporated municipality or the public roads of this State or anywhere within this State, or the operation by such nonresident of a motor vehicle on any
such public highways, streets or public roads or anywhere within the State other than as so permitted or regulated shall be deemed equivalent to the appointment by such nonresident of the Director of the Department of Motor Vehicles or of his successor in office to be his true and lawful attorney upon whom may be served all summons or other lawful process in any action or proceeding against him growing out of any accident or collision in which such nonresident may be involved by reason of the operation by him, for him or under his control or direction, express or implied, of a motor vehicle on such public highways, streets or public roads or anywhere within this State. Such acceptance or operation shall be a signification of his agreement that any such process against him shall be of the same legal force and validity as if served on him personally.
Service of process upon the Director of the Department of Motor Vehicles, as agent of a: (a) nonresident driver under the provisions of Section 15-9-350 ... shall be made by leaving a copy thereof, with an appropriate fee, in the hands of the Director of the Department of Motor Vehicles or his office and such service shall be sufficient service upon the nonresident if notice of the service and a copy of the process are forthwith sent by certified mail by the plaintiff or the Director of the Department of Motor Vehicles to the defendant and the defendant‘s return receipt and the plaintiff‘s affidavit of compliance herewith are appended to the summons or other process and filed with the summons, complaint, and other papers in the cause.
The record in this matter shows compliance with the requirements of
Our courts have long held that in order to establish that service has been properly effected, the plaintiff need only show compliance with the civil rules on service of process. McCall v. IKON, 363 S.C. 646, 652, 611 S.E.2d 315, 317 (Ct.App.2005); Moore v. Simpson, 322 S.C. 518, 523, 473 S.E.2d 64, 67 (Ct.App.1996). When these rules are followed, there is a presumption of proper service. Roche v. Young Bros., Inc. of Florence, 318 S.C. 207, 211, 456 S.E.2d 897, 900 (1995). The McClurgs showed compliance with the rules, and therefore service was presumptively proper. As previously noted, a party making a motion under Rule 60(b) has the burden of presenting evidence proving the facts essential to entitle him to relief. Bowers v. Bowers, 304 S.C. 65, 67, 403 S.E.2d 127, 129 (Ct.App.1991). The trial court made a factual determination, one clearly supported by the evidence, that Deaton did in fact receive the summons and complaint, and his simple denial of the same was insufficient to show mistake, surprise, inadvertence, or excusable neglect. Cf. Fassett v. Evans, 364 S.C. 42, 47, 610 S.E.2d 841, 844 (Ct.App.2005) (noting that an officer‘s return of process creates the legal presumption of proper service that cannot be impeached by the mere denial of service by the defendant). Accordingly, we find no abuse of discretion in the trial court‘s refusal to set aside the default judgment as to Deaton pursuant to Rule 60(b)(1), SCRCP.
Deaton lastly argues the default judgment should be set aside because the actual judgment entered was incongruent with the damages alleged in the pleadings. He contends that included within the court‘s award for Ann McClurg were damages for “in kind services,” and while Steve McClurg requested “in kind services” damages in his loss of consortium claim, Ann McClurg failed to allege such a loss in her complaint.
The first time Deaton raised this argument was in his motion to reconsider. Deaton clearly could have raised the matter in his motion to set aside the default judgment but failed to do so. Accordingly, this issue is not preserved for
CONCLUSION
For the foregoing reasons, the trial court‘s order denying New Prime‘s and Deaton‘s motions to set aside the default judgment is
AFFIRMED.
GEATHERS, J., concurs.
HEARN, C.J., concurs in part and dissents in part.
HEARN, C.J. (concurring in part and dissenting in part):
I respectfully concur in part, and dissent in part. I would reverse the circuit court‘s denial of Deaton and New Prime‘s Rule 60(b), SCRCP motion, and remand for a full trial on the merits.
I agree with the majority that the circuit court erred in denying New Prime relief on the basis that it was not a party, after previously granting its motion to intervene. However, I part company with the majority in holding that neither party satisfied the requirement of a meritorious defense under Rule 60(b).
“In determining whether to grant a motion under Rule 60(b), the trial judge should consider: (1) the promptness with which relief is sought, (2) the reasons for the failure to act promptly, (3) the existence of a meritorious defense, and (4) the prejudice to the other party.” Mictronics, Inc. v. S.C. Dep‘t of Revenue, 345 S.C. 506, 510-11, 548 S.E.2d 223, 226 (Ct.App.2001). Here, there is no question that New Prime acted promptly in seeking relief under Rule 60(b) as soon as it learned that default judgment had been taken against Deaton. The McClurgs made no showing of how they would be prejudiced if the default judgment were to be set aside, and the law favors the resolution of disputes based upon all parties having their day in court. Thus, the trial court hinged its denial of
Under the majority‘s view, Appellants had to establish a meritorious defense as to liability in order to prevail on their Rule 60(b) motion. I agree there was no showing by Appellants concerning Deaton‘s lack of responsibility for causing the accident, but I would hold there was evidence of a meritorious defense, provided by the McClurgs’ own attorney, which related to the amount of damages. In negotiations with New Prime‘s carrier, Zurich, which were ongoing prior to and beyond the filing of suit, McClurgs’ counsel made a settlement demand of $170,000. I would hold this course of conduct by McClurgs’ attorney is sufficient to satisfy Rule 60(b)‘s meritorious defense requirement. Although not previously recognized in South Carolina, courts in other jurisdictions have held that in the context of a Rule 60(b) motion, an allegation that the amount of damages could be different from what was awarded under the default judgment, is sufficient to satisfy the meritorious defense requirement. See e.g. Augusta Fiberglass Coatings, Inc. v. Fodor Contracting Corp., 843 F.2d 808 (4th Cir.1988); Wainright‘s Vacations, LLC v. Pan American Airways Corp., 130 F.Supp.2d 712 (D.Md.2001) (applying Augusta Fiberglass); Esteppe v. Patapsco & Back Rivers Railroad, 2001 WL 604186 (D.Md.2001); Miller v. Susa Partnership, L.P., 2008 WL 660563 (Ohio App. 10th 2008); Oberkonz v. Gosha, 2002 WL 31320242 (Ohio App. 10th 2002); Cook v. Rowland, 49 P.3d 262 (Alaska 2002); Syphard v. Vrable, 141 Ohio App.3d 460, 751 N.E.2d 564 (2001); Ferguson & Co. v. Roll, 776 S.W.2d 692 (Tex.App. Dallas 1989, no writ); The Moving Co. v. Whitten, 717 S.W.2d 117 (Tex.App.-Houston 1986, writ refd n.r.e.) (overruled on other grounds); Beal v. State Farm Mut. Auto. Ins. Co., 151 Ariz. 514, 729 P.2d 318 (Ct.App.1986); Hertz v. Berzanske, 704 P.2d 767 (Alaska 1985).
I also disagree with the majority‘s holding that Appellants did not preserve this issue for appellate review. Our preservation rules exist to ensure that issues argued on appeal were fairly presented and ruled upon at the trial level. McClurgs’ counsel‘s settlement demand was clearly argued to the circuit court and referenced in memoranda and affidavits submitted at the motion hearing. The circuit court held that New Prime
I join the majority‘s serious concern with the conduct of the McClurgs’ counsel in the manner in which he pursued this case. While no duty technically existed to notify New Prime or Zurich of the filing of suit against Deaton, the failure to do so under the circumstances of this case compromises the high ethical standards attaching to the practice of law. As the majority points out, the McClurgs indicated in correspondence to Zurich that New Prime would be served as a defendant in the event a settlement could not be reached, stating emphatically: “If I haven‘t heard from [Zurich] by that time, I will file suit and serve the Defendant and send you a courtesy copy of the pleadings.” The maxim that a lawyer‘s word is his bond is not only a time-honored tradition; it is included as a guiding principle in the South Carolina Bar‘s Standards of Professionalism.
Moreover, during negotiations, the McClurgs’ counsel sent a copy of his proposed complaint to New Prime which showed both New Prime and Deaton as defendants. However, the complaint ultimately served on Deaton made no mention of New Prime as a defendant. Inexplicably, less than a month after filing the complaint against Deaton, McClurgs’ counsel appeared to be continuing settlement negotiations with New Prime by sending it an additional medical report.
While the facts presented here—the failure to serve an insurance company where there is a clear and established prior course of dealings between the carrier and the plaintiff—appear to present a novel situation in South Carolina,2 the Indiana Court of Appeals addressed a similar situation in McGee v. Reynolds, 618 N.E.2d 40 (Ind.Ct.App.1993). There, two parties were involved in an automobile accident and
The McGee court affirmed the trial court‘s decision to grant the at-fault driver‘s motion to set aside the default judgment where the plaintiff‘s attorney failed to give notice of the lawsuit to defendant‘s insurer. Id. at 41. The court described the plaintiff attorney‘s behavior as bad faith and “smack[ing] of chicanery and unfair advantage” which could not be tolerated. Id. Further, in reaching its decision, the McGee court referenced Boles v. Weidner, 449 N.E.2d 288, 290 (Ind.1983) and stated:
While there is no general duty to inform the defendant‘s insurer of a lawsuit, in Boles, the supreme court concluded the plaintiff‘s failure to notify the defendant‘s insurer of the existence of the lawsuit after negotiations had occurred was a valid consideration in determining whether to set aside a default judgment.
Id. The Boles court had determined that failure to notify the insurer, standing alone, was not enough to justify setting aside the default judgment. However, in McGee, the court held that the failure to serve the insurer after negotiations were undertaken, when combined with the attorney‘s refusal to answer the direct inquiry by the insurance company as to the status of the claim, constituted grounds for relief. Id.
The case before us is factually very similar to McGee. Here, McClurgs’ counsel continued to negotiate with Zurich while filing a complaint against the at-fault driver without notice to New Prime or its carrier, despite his prior written assurance that he would send Zurich a courtesy copy. Additionally, the actual complaint served on Deaton was markedly different from the copy counsel had sent to Zurich, in that New Prime was no longer named as a defendant.
Accordingly, I concur in part and dissent in part.