Indiana Supreme Court: ‘Even Slight Evidence of Excusable Neglect’ Sufficient to Uphold Trial Court’s Setting Aside of Default Judgment

Permanent Link Archived: https://perma.cc/4REL-WC6K

by: Colin E. Flora

     For many, appellate courts are viewed as a second bite at the apple. The simple fact, however, is that they are anything but. There are innumerable postures in which a case may reach the appellate court subject to a highly deferential standard of review, creating a hefty burden of reversing the trial court. There are some areas of practice, like class actions, in which courts routinely recognize that the trial court’s decision is owed deference, while, in the same opinion, showing remarkably little deference.

     Today, instead of looking at cases in which appellate courts may have exercised too heavy a hand, we turn to a case exemplifying just how seriously that deference can be taken. We do so through the recent per curiam ruling by the Indiana Supreme Court in Wamsley v. Tree City Village.

     The underlying facts of the case are fairly straightforward: a tenant of an apartment complex accidentally discharged a handgun round, sending a bullet into an adjacent apartment, striking Wamsley in the side. Where things get convoluted is what happened after that. Due to the brevity of the Supreme Court’s decision, we turn to the Indiana Court of Appeals’ summary of the facts. Prior to filing the lawsuit, Wamsley’s lawyer sent a letter to the Landlords they believed owned the complex informing it of the incident and notifying it of an intention to file suit. That led to conversations with the Landlords’ insurer that failed to reach a pre-suit settlement. So, five months after being shot, Wamsley filed suit. The Landlords received service of the complaint and chose to email Wamsley’s lawyer saying that they did not own the apartment complex. But the Landlords did not appear in the case or answer the complaint. Because they did not, default judgment was entered against them.

     But that is not where the story ends. Before a damages hearing could be conducted, the Landlords appeared and sought relief from the default judgment pursuant to Trial Rule 60(B)(1). The rule allows a judgment to be set aside were it was the product of “mistake, surprise, or excusable neglect” and the party against whom judgment was entered is able to assert a meritorious defense. The trial court agreed with the Landlords and set aside the default. Wamsley appealed.

     Before the Indiana Court of Appeals, the Landlords argued that they had adequately shown an instance of excusable neglect “because: (1) ‘Wamsley failed to notify the insurer of the existence of the Complaint[;]’ and (2) Landlords believed they ‘had done all that was required of them by allowing the insurer [to] handle the claim.’” The Court of Appeals did not agree and reversed. The court did not reach the issue of whether the Landlords asserted a meritorious defense because it had already found sufficient ground to reinstate the default judgment.

     The Landlords sought transfer to the Indiana Supreme Court. The court set the matter for oral argument before deciding whether to grant transfer, which is not particularly unusual for the Indiana Supreme Court. It appears that the Landlords’ counsel was sufficiently convincing, because, based on that argument, the court granted transfer and affirmed the trial court’s decision setting aside the default judgment. It took just over a page for the unanimous court to do so.

     So why was the Indiana Supreme Court so easily able to reinstate the trial court’s decision? The answer is because the Indiana Supreme Court chose to adhere to the dictate of affording the trial court a great deal of discretion:

An appellate court reviews a trial court’s decision to set aside a default judgment for abuse of discretion, resolving any doubt as to the propriety of default judgment in favor of the defaulted party. The controlling question is whether there exists “even slight evidence of excusable neglect.” 

Our deferential standard of review compels us to affirm the trial court. There exists evidence of excusable neglect in this case – although that evidence is indeed exceedingly slight – and Landlords have made the requisite showing under Trial Rule 60(B)(1) of a meritorious defense. 

Accordingly, we affirm the trial court’s orders setting aside the default judgment against Landlords and denying Wamsley’s motion to correct error, and we remand this case to the trial court for further proceedings consistent with this opinion. 

     You might be wondering what showing the Landlords made as to the meritorious defense. Trust me, you are not alone. The court makes no specific mention of it. Based upon the Court of Appeals’ decision, one might guess the defense is that the claim that the Landlords did not own the apartment complex. But that does not appear to be it. The Court of Appeals thought that nothing more than pointing out an “immaterial defect.” And, at oral argument, the Landlords’ counsel did not contest that point.

     Instead, to find the meritorious defense, we turn to the briefing to the Court of Appeals, in which the Landlords argued:

Landlords explained to the trial court the law in favor of the position that there was no Viable theory of recovery available to Wamsley. Specifically, Landlords cited Houin v. Burger by Burger for the proposition that as “a general rule, a landlord who gives a tenant full control of a leased property will not be liable for personal injuries sustained by the tenant or other persons lawfully upon the leased property.” Landlords further explained that Wamsley was “(1) not a business invitee; (2) was not entitled to a heightened standard of care; and (3) even if she were entitled to a heightened standard of care, [Landlords] did not owe a duty to protect her from the negligent discharge of a firearm.”

     What can we take from this case? The simple answer is not too awful much. It stands for the strong proposition that if there is “even slight evidence of excusable neglect,” then a trial court’s decision to set aside default judgment should be upheld. Notably, that does not mean that “even slight evidence of excusable neglect” is enough to convince a trial court. The premise here is that the trial court has extremely broad discretion.

     A large theme in the oral argument was that what happened to the Landlords is fairly typical when insurance is involved. That is, many people believe once they put their insurer on notice, they are relieved from having to take any further steps on their own. The Court of Appeals found little sympathy for the Landlords, writing:

Even if we accept the Landlords’ contention that they are not “sophisticated litigants,” we certainly cannot say that the Landlords are “sympathetic defendant[s]” . . . and we reiterate . . . that “[t]he judicial system simply cannot allow its processes to be stymied by simple inattention.” Wamsley notes, “Landlords manage an apartment complex. To be entrusted with such management of real property indicates a level of sophistication.” We agree. While Landlords’ status as a litigant may not rise to the level of “savvy” and “sophisticated” as the bank described by our supreme court in Huntington National Bank they are certainly experienced with litigation and the judicial procedural process through eviction proceedings, if nothing else.

And, based on how the Indiana Supreme Court handled the case, I do not think it stands as support for the proposition that similar circumstances constitute excusable neglect.

     No, in the end this appears simply to be a matter of the court living up to the dictates of the standard of review: high deference means high deference.

     Join us again next time for further discussion of developments in the law.

Sources

*Disclaimer: The author is licensed to practice in the state of Indiana. The information contained above is provided for informational purposes only and should not be construed as legal advice on any subject matter. Laws vary by state and region. Furthermore, the law is constantly changing. Thus, the information above may no longer be accurate at this time. No reader of this content, clients or otherwise, should act or refrain from acting on the basis of any content included herein without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue.