CENTRAL MUTUAL INSURANCE COMPANY v. KICKLIGHTER Et Al. , 339 Ga. App. 658 ( 2016 )

FIFTH DIVISION
PHIPPS, P. J.,
DILLARD and PETERSON, JJ.
NOTICE: Motions for reconsideration must be
physically received in our clerk’s office within ten
days of the date of decision to be deemed timely filed.
http://www.gaappeals.us/rules
November 18, 2016
In the Court of Appeals of Georgia
A16A2161. CENTRAL MUTUAL INSURANCE COMPANY. v.
KICKLIGHTER et al.
PETERSON, Judge.
Leslie and Kathy Kicklighter’s house burned down. Central Mutual Insurance
Company, with whom they had a homeowners’ insurance policy, paid them several
hundred thousand dollars under the policy. The Kicklighters contended they were
owed still more; when Central Mutual did not pay, the Kicklighters sued them for bad
faith. Central Mutual responded to the lawsuit by filing a motion to dismiss, but not
an answer. So far, so good for the Kicklighters. But then the Kicklighters’ counsel
obtained an ex parte default judgment against Central Mutual, and then intentionally
withheld the judgment from Central Mutual until the time to appeal or file a motion
to reconsider had run. We cannot allow conduct of this sort to stand, and so we
reverse the order of the trial court denying Central Mutual’s understandably belated
motion to set aside.
We review a trial court’s refusal to set aside a default judgment for an abuse
of discretion, but review questions of law de novo. See Hutcheson v. Elizabeth
Brennan Antiques & Interiors, Inc., 317 Ga. App. 123, 125 (730 SE2d 514) (2012).
The record evidence, which is largely undisputed, shows that on October 16,
2015, the Kicklighters filed suit against Central Mutual after it allegedly refused to
provide full coverage for a fire loss under the Kicklighters’ homeowners’ insurance
policy. The Kicklighters sought to recover the additional amounts allegedly owed
under the policy, attorneys’ fees, and bad faith damages. On November 20, Central
Mutual filed a motion to dismiss the complaint, asserting that it made a partial
payment of $441,000 under the policy and denying that it acted in bad faith in
refusing to pay the entirety of the Kicklighters’ fire loss claim because coverage
issues remained unsettled and the Kicklighters never made any demand for immediate
payment of the entire policy limits.
On December 16, 2015, the trial court held a meeting with the Kicklighters’
counsel and signed an order entering a default judgment of $124,660 plus interest for
the Kicklighters. Central Mutual was not given notice of the hearing and therefore did
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not attend. In its default judgment order, the trial court ruled that Central Mutual’s
motion to dismiss could not be construed as an answer, Central Mutual was therefore
in default, and Central Mutual failed to open the default.
The trial court did not provide a copy of the default judgment to Central
Mutual, and despite intervening communications with Central Mutual, the
Kicklighters’ counsel made no mention of it either. Instead, the Kicklighters’ counsel
deliberately withheld the default judgment from Central Mutual until February 1,
2016, when the Kicklighters made a demand of payment of the judgment. By this
time, the 30-day period for filing a notice of appeal from the order had expired and
the term of the court had ended. OCGA § 15-6-3(30)(A) (the court terms for the
Superior Court of Bulloch County begin on the first Mondays in February, May,
August, and November). At oral argument, the Kicklighters’ counsel acknowledged
that he delayed notice, at least in part, for the purpose of ensuring that Central Mutual
could not appeal.
Soon after receiving notice of the default judgment, Central Mutual moved to
set aside the judgment. Central Mutual argued that the judgment should be set aside
because its motion to dismiss was a responsive pleading that could be construed as
an answer so as to preclude default; the entry of default judgment was improper
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where a dispositive motion is pending; it was not given notice that the court would
enter a default judgment; and the Kicklighters’ counsel acted in bad faith in failing
to provide prompt notice of the default judgment. The trial court held a hearing on
Central Mutual’s motion to set aside, during which the following colloquy occurred
between the trial court and the Kicklighters’ counsel (John B. Manly and Bobby T.
Jones):
Court: Do you recall when we had the meeting in the — in the law
library and I did — I signed the order. Do you remember what I told
you? I told you to make sure that the opposing side got a copy.
Manly: That’s correct.
Court: I did say that. Correct?
Manly: I don’t remember exactly, but it doesn’t surprise me.
Court: I did. I did.
Manly: And we served a copy, Your Honor, in accordance with —
Court: Yes. When did you serve a copy?
Manly: I believe the date was February 1st or 2nd.
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Court: And when did I sign the order?
Manly: I think it was December 17th, if I recall.
Court: And why did you wait that long?
Manly: Because of the term of court and because this case Winslet v.
Guthrie[, 326 Ga. App. 747 (755 SE2d 287) (2014),] allows us to wait
until the new term of court because of his failure to file an answer and
his negligence in not filing an answer absolves our responsibility of
having to serve him with that.
...
Court: [T]he only thing that bothers me is I specifically told you folks
to make sure they got a copy and I think that somewhat — if the case
says that, the case says that. But it was my clear impression that I had
informed you to give them notice and my impression or my belief was
that the notice would be forthcoming and not delayed. Okay.
Manley: Yes, sir.
Jones: May I address that?
Court: Why?
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Jones: Because, Judge, I’ve been before you decades now . . . As you
know, I’ve known you almost forty years.
Court: We have.
Jones: I can assure you, Judge, and I think my experience will bear this
out, if you had told us and if you did tell us, I’m not denying what you
said. I don’t recall it, but if — we have never, and I personally in my
dealings with this Court and all other courts, have never not done as
instructed by a court even when I disagreed with it. So I want you to
understand that I didn’t —
Court: Oh, I didn’t say today. I didn’t say tomorrow. I just said give
them notice.
Jones: I understand. And we did, Judge, but whatever you told us I
promise you I did my best and always will, including today, comply with
the Court’s directions and instructions. I just don’t want the Court
having any belief of anything otherwise.
Court: That’s fine.
Jones: And, I mean, my reputation with the Court is more important than
any one single case. Whatever the Court — the Court has the authority
to rule and it’s the (inaudible) of the lawyers and parties to comply with
the Court’s rulings and I just want you to understand that that’s always
been my position and is today and will always be. Following the
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hearing, the trial court denied the motion without explanation, and we
granted Central Mutual’s application for discretionary review.
On appeal, Central Mutual argues that the trial court erred in denying its
motion to set aside the default judgment because Central Mutual filed a motion to
dismiss that the court should have construed as an answer, the court held an ex parte
hearing when denying the motion to dismiss and granting default judgment to the
Kicklighters, and plaintiffs’ counsel deliberately delayed providing Central Mutual
notice of the order granting default judgment until the time frame for filing a notice
of appeal had expired and the term of the court had ended. We agree that (1) Central
Mutual was entitled to notice that the court would hold a hearing in which it would
consider whether Central Mutual’s motion to dismiss constituted an answer, and (2)
that the court erred in entering default judgment without first disposing of Central
Mutual’s pending motion. Therefore, we reverse the denial of its motion to set aside
the default judgment.
A motion to set aside may be brought on several grounds, including when a
nonamendable defect appears on the face of the record or pleadings. OCGA § 9-11-
60(d)(3). “In cases involving a default judgment, this type of defect arises where the
record shows on its face that the default was entered on an improper basis.” Hiner
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Transp., Inc. v. Jeter, 293 Ga. App. 704, 705 (667 SE2d 919) (2008) (citing Shields
v. Gish, 280 Ga. 556, 558 (2) (629 SE2d 244) (2006)) (punctuation omitted). The
record shows that the trial court entered the default on an improper basis and,
therefore, should have granted Central Mutual’s motion to set aside.
“[U]nder the [Civil Practice Act] a party is to be given notice and the
opportunity to amend defective pleadings where such notice will facilitate [a]
decision on the merits. The [Civil Practice Act] does not penalize a party irrevocably
for one misstep in pleading.” McDonough Constr. Co. v. McLendon Elec. Co., 242
Ga. 510, 515 (250 SE2d 424) (1978). If the defendant timely files a document
responding to the complaint that could be construed as an answer, a trial court may
not hold an ex parte hearing disposing of the filing; it must provide notice to the
defendant that the court will rule on the sufficiency of its filing as an answer. See
Brown v. Brown, 217 Ga. App. 245, 246-47 (457 SE2d 215) (1995) (regardless of
whether defendant’s letter was sufficient as an answer, it was properly before the trial
court and could not be disposed of in an ex parte proceeding without notice thereof
to the defendant); cf. Livesay v. King, 129 Ga. App. 751, 751 (201 SE2d 178) (1973)
(“The rule of fair play suggests at the outset that one who moves the court to change
the status of a pending matter . . . should serve the opposite party with a copy of the
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motion and of a rule nisi which the court should enter thereon, thus affording to the
opposite party a fair opportunity to object or to defend against the proposed action.”).
And it is reversible error for the trial court to enter default judgment where a
dispositive motion is pending. See US Professionals, LLC v. Directlink India (P) Ltd.,
247 Ga. App. 679, 680 (1) (545 SE2d 95) (2001) (although defendant failed to appear
for trial, it was error to enter judgment against the defendant when the court failed to
dispose of the defendant’s motion to dismiss for improper venue); Williams v. Coca-
Cola Co., 158 Ga. App. 139, 140 (2) (279 SE2d 261) (1981) (it is harmful error to
enter default judgment without ruling on a motion to dismiss or, alternatively, a
motion for summary judgment that was filed within the time permitted to file an
answer).
Here, the trial court held an ex parte hearing with the Kicklighters’ counsel in
a law library before signing the default judgment order in which it deemed Central
Mutual’s motion to dismiss an insufficient answer. The failure to give Central Mutual
notice that the issue of the sufficiency of the answer would be heard requires the grant
of Central Mutual’s motion to be set aside. See Brown, 217 Ga. App. at 247.
Moreover, Central Mutual provided evidence outside of the pleadings in support of
its motion to dismiss to argue that it was entitled to a judgment on the merits. This
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was a dispositive motion that the trial court was required to dispose of before entering
default judgment, and it committed reversible error in failing to do so. See US
Professionals, 247 Ga. App. at 680 (1); Williams, 158 Ga. App. at 140 (2). Because
we reverse on these grounds, it is unnecessary to consider Central Mutual’s
arguments that the trial court should have set aside the default judgment because
Central Mutual’s motion to dismiss constituted an answer, or because the
Kicklighters’ counsel intentionally withheld providing notice of the judgment to
prejudice Central Mutual.1 Accordingly, we reverse.
Judgment reversed. Phipps, P. J., and Dillard, J., concur.
1
We note, however, that the Kicklighters’ counsel misconstrued Winslett when
arguing at the motion to set aside hearing that there was no duty to inform Central
Mutual of the default judgment. In Winslett, we concluded that the trial court had no
responsibility to give notice of a default judgment when the defendant waived the
right to receive future notices, like the entry of the default judgment, by failing to file
any pleadings. 326 Ga. App. at 751-52 (4) (citing OCGA § 9-11-5(a)). Here, Central
Mutual filed a motion to dismiss, and so Winslett does not apply.
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