Liberty Mutual Fire Insurance Company v. Quiroga-Saenz. ( 2017 )

FIFTH DIVISION
MCFADDEN, P. J.,
BRANCH and BETHEL, 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
October 27, 2017
In the Court of Appeals of Georgia
A17A1148. LIBERTY MUTUAL FIRE INSURANCE COMPANY
v. QUIROGA-SAENZ.
BRANCH, Judge.
In August 2013, Maria Quiroga-Saenz rear-ended a car driven by her sister
Armandina. On the day after Armandina obtained a default judgment of $1 million
against Maria arising from this accident, Maria’s insurer, Liberty Mutual Fire
Insurance Company, retained counsel for Maria, who filed an answer and moved to
set aside the default judgment. As part of a settlement with Armandina, however,
Maria later withdrew the motion to set aside. Liberty Mutual then moved to intervene
on grounds including that Maria had abandoned her own defense. On appeal, Liberty
Mutual argues that the trial court did not have jurisdiction to enter the default
judgment and erred when it denied Liberty Mutual’s motion to intervene. We agree
with the second of these contentions, and we therefore reverse.
The relevant facts are not in dispute. On August 28, 2013, Maria and
Armandina were on their way to a social function when Maria drove her car into the
back of her sister’s car, causing $1,762.25 in damage to that car. Although Armandina
did not seek medical treatment on the day of the accident, she eventually incurred
approximately $5,000 in medical expenses arising from it.
In April 2015, Armandina filed a negligence complaint against Maria and
provided a courtesy copy of the complaint to Liberty Mutual. On May 20, 2015, and
although service on Maria had not yet been achieved, Armandina’s counsel sent
Liberty Mutual a written request to settle Armandina’s claim for $25,000, including
her medical expenses and her pain and suffering.
On August 7, 2015, Liberty Mutual sent Maria a letter advising her that the
insurer “ha[d] reason to believe [that] a lawsuit may be [or] ha[s] been filed against”
her by Armandina. The letter asked that Maria forward any materials she might
receive concerning the lawsuit to Liberty Mutual and reserved Liberty Mutual’s rights
under the policy. Maria was served on October 7, 2015 – six months after the
complaint was filed, and six weeks after the expiration of the two-year statute of
2
limitation.1 The return of service was filed on Thursday, November 5, 2015. Maria
did not file an answer by Monday, December 7, 2015,2 however, such that the case
went into default on the following day, Tuesday, December 8.3
Liberty Mutual states on appeal that it learned on December 14, 2015, that
service had been effected on Maria, and that it retained counsel for Maria the
following day. Maria’s first counsel averred, however, that neither he nor anyone at
his firm received “any pleadings on record with the Clerk of Court,” including the
motion for default judgment and the default judgment, “until the afternoon of
December 22, 2015.” OCGA § 9-11-55 (a) provides that “[i]f [a] case is still in
default after the expiration of the period of 15 days, the plaintiff at any time
1
See OCGA § 9-3-33 (setting two-year limitation period for “actions for
injuries to the person”).
2
See OCGA §§ 9-11-12 (a) (“A defendant shall serve his answer within 30
days after the service of the summons and complaint upon him, unless otherwise
provided by statute”), 9-11-4 (h) (“If [a plaintiff’s] proof of service is not filed within
five business days, the time for the party served to answer the process shall not begin
to run until such proof of service is filed”); OCGA § 9-11-6 (a), citing OCGA § 1-3-1
(d) (3) (“if the last day [for computing time under OCGA § 1-3-1] falls on Saturday
or Sunday, the party having [a] privilege or duty shall have through the following
Monday to exercise the privilege or discharge the duty”).
3
See OCGA §§ 9-11-55 (a) (“If in any case an answer has not been filed within
the time required by this chapter, the case shall automatically become in default
unless the time for filing the answer has been extended as provided by law.”).
3
thereafter shall be entitled to verdict and judgment by default.” (Emphasis supplied.)
On Tuesday, December 22, however — only fourteen days after the case went into
default4 — Armanida moved for and obtained a default judgment against Maria in the
amount of $1 million. On the following day (the fifteenth after default), Wednesday,
December 23, Maria filed an answer asserting defenses including the statute of
limitation and also moved to “vacate or set aside” the default judgment. On the same
day, Liberty Mutual notified its insured, Maria’s husband, that it was reserving its
“right to seek a declaration of its rights and duties under the policy regarding defense
and/or indemnity,” including Maria’s failure to cooperate “in the investigation,
settlement or defense” of Armanida’s claim.
On December 28, 2015, Armanida sent a letter to Maria’s counsel offering not
to enforce the default judgment against Maria in exchange for Maria’s assignment of
her claims against Liberty Mutual, as well as a promise that Maria not seek to set
aside or appeal the default judgment, with this offer expiring on January 7, 2016. On
4
See OCGA § 1-3-1 (d) (3) (“when a period of time measured in days, weeks,
months, years, or other measurements of time except hours is prescribed for the
exercise of any privilege or the discharge of any duty, the first day shall not be
counted but the last day shall be counted; and, if the last day falls on Saturday or
Sunday, the party having such privilege or duty shall have through the following
Monday to exercise the privilege or to discharge the duty.”)
4
January 6, 2016, Maria’s original counsel withdrew and her new counsel appeared,
with Maria’s written consent. On January 7, Maria’s new counsel moved to amend
her previous motion to set aside the default judgment, arguing inter alia that the
default judgment was void as entered before the expiration of the 15-day period for
opening default as a matter of right. On the same day, however, Maria apparently
accepted Armandina’s offer of settlement, assigning Maria’s claims against Liberty
Mutual to Armandina and promising not to set aside or appeal the default judgment.5
On January 18, Liberty Mutual moved to intervene in Armandina’s action,
arguing that by assigning her claims to Armandina, Maria had abandoned meritorious
defenses (including the applicable statute of limitation) to Liberty Mutual’s detriment.
On January 26, Maria’s new counsel represented to the trial court that “the parties
have resolved any or all issues between them” and withdrew Maria’s motion to set
aside the default judgment, “waiv[ing] any and all rights of appeal that she may have
in connection with this matter.”
On July 14, 2016, the trial court denied Liberty Mutual’s motion to intervene
on the grounds that (1) Armandina’s counsel had “no obligation” to notify Maria that
Armandina was seeking a default judgment; (2) Liberty Mutual had not conceded that
5
The record does not contain an executed copy of Maria’s assignment.
5
it owed any obligation to Maria under the policy, and thus had not experienced any
impairment in interest; and (3) Liberty Mutual had retained “two separate law firms
to represent [Maria], yet waited almost a month after receiving notice of service and
default before hiring its own counsel” to file the motion to intervene. This appeal
followed.6
1. Liberty Mutual first argues that the trial court must set aside its default
judgment against Maria because her 15-day period to open default as a matter of right
had not yet expired when the trial court entered the judgment, with the result that the
trial court lost its subject matter jurisdiction. We disagree.
Liberty Mutual is correct that the trial court erroneously entered the default
judgment prematurely under the terms of OCGA § 9-11-55 (a).7 However, “[a]n
6
We have previously denied Armandina’s motion to dismiss this appeal. See
Burruss v. Ferdinand, 245 Ga. App. 203 (1) (536 SE2d 555) (2000) (when the denial
of a motion to intervene is a “final judgment” in the case, a direct appeal is authorized
by OCGA § 5-6-34 (a) (1)); compare Davis v. Deutsche Bank Nat. Trust Co., 285 Ga.
22, 23-24 (673 SE2d 221) (2009) (when an order denying a motion to intervene was
entered before final judgment, it was reviewable only via the interlocutory appeal
procedure of OCGA § 5-6-34 (b)).
7
The trial court also erred when it calculated the 15-day period within which
default could be opened as running from October 7, 2015. The period for opening
default only began to run on November 5, when proof of service of Armandina’s
complaint was filed. See OCGA § 9-11-4 (h) (if proof of service not filed within five
business days of service, “the time for the party to answer the process shall not begin
to run until such proof of service is filed”).
6
appeal must be filed by one who has standing to pursue it.” Davis, 285 Ga. at 23
(citations omitted). As to the default judgment, Liberty Mutual “is not a ‘losing
party’; . . . in fact, [it] is no party at all.” Id. at 24; see also Rice v. Champion Bldgs.,
288 Ga. App. 597, 601 (2) (654 SE2d 390) (2007) (as non-parties to case culminating
in a default judgment, appellants could not appeal that judgment). Liberty Mutual not
being a party to Armanida’s action against Maria, it had no right to appeal the default
judgment entered in that action. Davis, 285 Ga. at 24 (dismissing appeal); Rice, 288
Ga. App. at 601 (2).
While it is true that a non-party can collaterally attack a judgment void on its
face, this trial court’s default judgment is not void, but rather voidable.8 See Logan
v. Nunnelly, 128 Ga. App. 43, 46 (195 SE2d 659) (1973) (where a judgment “did not
show on its face that it was void for lack of jurisdiction of the subject matter or of the
parties[,] it would only be subject to direct attack”). Only consideration of the
evidence outlined above concerning the timeline of service, proof of service, and
failure to answer would show that this default judgment was entered prematurely;
8
See OCGA § 9-11-60 (a) (“A judgment void on its face may be attacked in
any court by any person. In all other instances, judgments shall be subject to attack
only by a direct proceeding brought for that purpose in one of the methods prescribed
in this Code section.”).
7
accordingly, it is voidable rather than facially void. See Murphy v. Murphy, 263 Ga.
280, 282-283 (430 SE2d 749) (1003) (a judgment was not open to collateral attack
under OCGA § 9-11-60 (a), but would have been open to a timely direct attack as
containing a non-amendable defect).
2. Liberty Mutual also asserts that the trial court erred when it denied its
motion to intervene. We agree.
OCGA § 9-11-24 sets out the standards for rightful and permissive
intervention, as follows:
(a) Intervention as of right. Upon timely application[,] anyone shall be
permitted to intervene in an action[ ] (1) [w]hen a statute confers an
unconditional right to intervene[,] or (2) [w]hen the applicant claims an
interest relating to the property or transaction which is the subject matter
of the action and he is so situated that the disposition of the action may
as a practical matter impair or impede his ability to protect that interest,
unless the applicant’s interest is adequately represented by existing
parties.
(b) Permissive intervention. Upon timely application anyone may be
permitted to intervene in an action[] (1) [w]hen a statute confers a
conditional right to intervene[,] or (2) [w]hen an applicant’s claim or
defense and the main action have a question of law or fact in common.
In exercising its discretion[,] the court shall consider whether the
intervention will unduly delay or prejudice the adjudication of the rights
of the original parties.
8
We begin with analyzing whether Liberty Mutual had a right to intervene under
OCGA § 9-11-24 (a). An applicant will not be permitted to intervene in an action
unless he can show “(1) an interest relating to the property or transaction which is the
subject matter of the action, (2) an impairment of his interest which may result from
an unfavorable disposition of the lawsuit to which intervention is sought, and (3)
inadequate representation of this interest by the parties now involved in the lawsuit.”
Brown v. Truluck, 239 Ga. 105, 106 (236 SE2d 60) (1977). As we noted long ago,
moreover, “[i]ntervention must be timely, whether asserted as a right or as a matter
of discretion.” Sta-Power Indus. v. Avant, 134 Ga. App. 952, 958 (3) (216 SE2d 897)
(1975) (citations omitted). “Intervention after judgment is not usually permitted[,] and
to justify it requires a strong showing” such as the preservation of “some right which
cannot otherwise be protected.” Sta-Power, 134 Ga. App. at 958-959 (3).”Whether
a motion to intervene is timely is a decision entrusted to the sound discretion of the
trial court.” Kroger v. Taylor, 320 Ga. App. 298, 298 (739 SE2d 767) (2013)
(citations and punctuation omitted).
(a) First, we find that Liberty Mutual’s motion to intervene was timely. The
trial court found that Liberty Mutual waited a month after hiring counsel to move to
9
intervene.9 Liberty Mutual hired counsel immediately after learning that Maria had
been served, however, and counsel’s uncontradicted testimony was that he filed
Maria’s answer and moved to set aside the default judgment only one day after
learning of that judgment. Further, only on January 7, 2016, when Maria apparently
entered into a settlement with her sister, including the withdrawal of the motion to set
aside, was Liberty Mutual on notice that Maria was actively undermining the
insurer’s effort to defend against that judgment such that it would be required to
intervene, which it moved to do on January 18, 2016 — 11 days after Maria entered
into the settlement, and before her attorney withdrew the motion to set aside. Under
these undisputed facts, we cannot agree that the motion to intervene was untimely,
and we hold that the trial court abused its discretion in so holding. Stephens v.
McGarrity, 290 Ga. App. 755, 758 (1) (a) (660 SE2d 770) (2008) (trial court abused
its discretion denying motion to intervene when an interested party to a settlement
objected to the settlement within 10 days and moved to intervene within 21 days).
9
Once counsel had been retained, he owed duties of care and loyalty, including
advice as to Maria’s contractual responsibility to assist in her defense, to her alone,
and not to Liberty Mutual. See Georgia Rules of Professional Conduct, Rule 5.4 (c)
(“A lawyer shall not permit a person who recommends, employs, or pays the lawyer
to render legal services for another to direct or regulate the lawyer’s professional
judgment in rendering such legal services.”).
10
(b) We also conclude that, upon Maria’s settlement, Liberty Mutual’s ability
to protect its interest was impaired or impeded.
Although Liberty Mutual has not given notice of or filed a declaratory action
concerning its and Maria’s respective responsibilities under the policy issued to
Maria’s husband, the couple had “timely unilateral notice of” and implicitly
consented to Liberty Mutual’s reservation of rights. Richmond v. Ga. Farm Bureau
Mut. Ins. Co., 140 Ga. App. 215, 218 (1) (231 SE2d 245) (1976) (an insurer who has
discovered “facts possibly constituting grounds of noncoverage” may either “enter
into a bilateral reservation of rights agreement with its insured” or, if the insured
refuses to enter into such an agreement, “giv[e] the insured a timely unilateral notice
of its reservation and nonwaiver of rights” as well as “notice of its intention to seek
immediate declaratory relief”); see also Kelly v. Lloyd’s of London, 255 Ga. 291, 293-
294 (336 SE2d 772) (1985) (insurer who had filed an answer with reservation of
rights and then a declaratory judgment 14 days later did not prejudice an insured or
waive its own rights by doing so).
Despite Liberty Mutual’s reservation of rights against Maria and her husband,
and thus against Armandina in any future action, however, it is not assured of an
opportunity to defend any such suit by the only means possible — that is, by
11
attacking the default judgment. First, as we have explained in Division 1, Liberty
Mutual, then and still a non-party, had no power to set the default judgment aside
under OCGA § 9-11-60 (d). See Rice, supra, 288 Ga. App. at 601 (2) (a non-party had
no standing to set aside a default judgment entered against a party in the underlying
suit). Second, any future action by Armandina to enforce the default judgment might
well be brought in a foreign court, or even a Georgia court, different than that which
rendered the original default judgment, in which case Liberty Mutual would not be
authorized to attack it. OCGA § 9-11-60 (b) (“[a] judgment may be attacked by [a]
motion . . . to set aside . . . only in the court of rendition”); see also State Auto Mut.
Ins. Co. v. Relocation & Corporate Housing Svcs., 287 Ga. App. 575, 577-578 (3)
(651 SE2d 829) (2007) (a trial court lacked subject matter jurisdiction over judgment
debtor’s action for contribution against its former co-defendants because that action
attempted a collateral attack on a prior judgment “not void on its face”).10 Third,
Liberty Mutual’s inability to attack the default judgment directly might also nullify
a possible and viable defense — that is, that Armandina had not succeeded in serving
10
As our Supreme Court has recently noted, “The nature of [a trial court’s]
inherent power [to set aside] is . . . [an] ability to change its own mind, not to set aside
an otherwise enforceable judgment entered by an entirely different court[.]” Lemcon
USA Corp. v. Icon Technology Consulting, — Ga. — (804 SE2d 347) (2017)
(emphasis in original).
12
her complaint within the applicable statute of limitation. See, e.g., Lawrence v.
Noltimier, 213 Ga. App. 628, 629 (445 SE2d 378) (1994) (affirming grant of
summary judgment when trial court had made a discretionary determination that
plaintiff who had filed a complaint within the statute of limitation had nonetheless
failed to show diligence in serving defendant 166 days after the statute had expired).
Under these circumstances, we must conclude that Liberty Mutual is “so
situated” by the sisters’ settlement that “the disposition of [Armandina’s] original
action” — including the entry of the default judgment against Maria, her settlement
with Armandina, the consequent withdrawal of the motion to set aside, and the denial
of Liberty Mutual’s motion to intervene — “may as a practical matter impair or
impede [the insurer’s] ability to protect its interest,” which is not “adequately
represented by existing parties.” OCGA § 9-11-24 (a) (2). The trial court thus abused
its discretion when it denied Liberty Mutual’s motion to intervene as untimely and
unmeritorious.
Judgment reversed. McFadden, P. J., and Bethel, J., concur.
13