Somerville Auto Transport Service, Inc. and Robert Souza v. Automotive Finance Corporation , 12 N.E.3d 955 ( 2014 )

FOR PUBLICATION Jul 02 2014, 11:10 am
ATTORNEY FOR APPELLANT: ATTORNEY FOR APPELLEE:
PETER S. KOVACS TRACY N. BETZ
Fishers, Indiana Taft Stettinius & Hollister LLP
Indianapolis, Indiana
IN THE
COURT OF APPEALS OF INDIANA
SOMERVILLE AUTO TRANSPORT )
SERVICE, INC. and ROBERT SOUZA, )
)
Appellant-Defendant, )
)
vs. ) No. 49A02-1307-CC-559
)
AUTOMOTIVE FINANCE CORPORATION, )
)
Appellee-Plaintiff. )
APPEAL FROM THE MARION SUPERIOR COURT
The Honorable Michael D. Keele, Judge
Cause No. 49D07-0810-CC-049340
July 2, 2014
OPINION - FOR PUBLICATION
BROWN, Judge
Somerville Auto Transport Service, Inc., and Robert Souza (together,
“Somerville”) appeal the trial court’s orders placing the cause of action on the active
docket and granting summary judgment in favor of Automotive Finance Corporation
(“AFC”). Sommerville raises two issues, which we revise and restate as:
I. Whether the court abused its discretion in placing the cause of action
on the active docket; and
II. Whether the court erred in entering summary judgment in favor of
AFC and against Somerville.
We affirm.
FACTS AND PROCEDURAL HISTORY
Loan
Somerville operated an auto dealership in Somerville, Massachusetts. AFC was in
the business of lending money to auto dealers to allow the dealer to acquire automobiles
at auction for resale to the dealers’ customers.
In October 2002, Somerville and AFC executed a Demand Promissory Note and
Security Agreement (the “Agreement”). Pursuant to the Agreement, Somerville could
request advances against a line of credit to finance its purchase of automobiles for resale.
Also, in October 2002, Souza, the principal of Somerville, executed an Unconditional and
Continuing Personal Guaranty which provided he was personally liable for Somerville’s
indebtedness to AFC. On February 24, 2006, on behalf of Somerville, Souza executed a
Representation Authorization Letter stating in part that Robson Merenciano was
authorized to buy and sell automobiles for Somerville and to execute company checks or
drafts and any other necessary instruments or documents. AFC made advances to
2
Merenciano against Somerville’s line of credit for the purchase of certain automobiles
between September 2006 and February 2007, and Somerville did not timely repay AFC
with respect to the amounts advanced for the purchase of these automobiles. On
February 20, 2007, Somerville executed a Representation Removal Letter stating
Merenciano was no longer authorized to conduct business on behalf of Somerville.
Proceedings
On October 30, 2008, AFC filed a complaint alleging under Count I that
Somerville was in breach of contract by failing to repay its indebtedness pursuant to the
terms of the Agreement; under Count II that Souza was personally liable for the
indebtedness of Somerville under the Guaranty; and under Count III that Somerville and
Souza committed fraud. AFC requested judgment under Counts I and II in the principal
amount of $89,233.87 together with default interest, floorplan fees, late fees, attorney
fees, and costs of collection. According to the chronological case summary (“CCS”), on
April 13, 2009, Somerville filed a motion for stay of proceedings pending final
adjudication of a related federal action, and on June 1, 2009, AFC filed a response in
opposition to Somerville’s motion. The court denied the motion for stay on June 2, 2009.
Trial Rule 41(E) Proceedings
On June 7, 2010, the trial court sua sponte issued notice to the parties that the
cause was scheduled for hearing under Trial Rule 41(E) on June 28, 2010. On June 25,
2010, AFC filed a motion to vacate the hearing.1
1
The CCS does not include an entry for this motion or indicate that the court held a hearing or
ruled on the motion, and the copy of the motion in the appellants’ appendix is not file-stamped. The copy
3
On May 2, 2011, the court sua sponte issued a notice to the parties that the cause
would be dismissed under Trial Rule 41(E) at a hearing on June 27, 2011, unless
sufficient cause was shown; however the court did not hold the scheduled hearing.2 On
June 27, 2011, AFC filed a Response to Rule 41(E) Notice which stated that it had
appeared by counsel in open court on June 27, 2011 to show cause why the lawsuit
should not be dismissed for inactivity and that it was submitting in writing its response to
the court’s notice “as follows: AFC submits that this matter has not been inactive, and
requests that this matter remain pending because AFC has been conducting discovery as
it prepares for trial. Indeed, AFC is presently awaiting [Somerville’s] responses to its
pending interrogatories and requests for production of documents.” Appellants’
Appendix at 33.
of the motion states that AFC had been actively litigating its claims against Somerville, that those efforts
focused on having a lawsuit against it filed by Somerville in Massachusetts dismissed for improper venue,
that the U.S. District Court for the District of Massachusetts had recently granted AFC’s motion finding
that Indiana is the proper venue for the claims, and that the parties were now free to focus their efforts on
this Indiana proceeding.
2
In the statement of facts in its brief, Somerville states its counsel personally appeared at the trial
court’s offices on June 27, 2011, prepared to argue for dismissal of the case, that a member of the court’s
staff informed its counsel that the case would be dismissed without the need for a hearing, that its counsel
did not observe a representative from or on behalf of AFC at the trial court’s offices, and that
consequently “he submitted a proposed order with the trial court’s clerk and left.” Appellants’ Brief at 5.
These statements are consistent with the statements in Somerville’s July 12, 2011 Verified Motion to
Reconsider and Vacate Order Reinstating This Case.
In the statement of facts in its brief, AFC states that its counsel did in fact appear for the hearing
on June 27, 2011 to show cause why the case should not be dismissed for inactivity, that court staff
advised that the judge was not available to conduct the scheduled hearing and instructed counsel to submit
a written notice of AFC’s desire to keep the case on the court’s active docket, and that AFC complied and
filed and served its written response to the court’s Trial Rule 41(E) notice that same day. These
statements are consistent with AFC’s June 27, 2011 Response to Rule 41(E) Notice and its July 25, 2011
response to Somerville’s motion to reconsider in which it stated in part: “AFC complied, and filed (and
served) its written response to the Court’s Rule 41(E) notice that same day. Apparently counsel for
[Somerville] also appeared on the morning of June 27 and submitted (but did not serve counsel for AFC)
a proposed order dismissing the case with prejudice.” Appellants’ Appendix at 41.
4
On June 28, 2011, the trial court entered an order stating:
This Cause having come before the Court on its own motion
pursuant to Indiana Trial Rule 41(E), all parties having been given due
notice, and the Court being duly advised.
IT IS THEREFORE ORDERED, ADJUDGED, AND
ADJUDICATED that this case is hereby dismissed with prejudice.
Id. at 31.
On July 6, 2011, the court sua sponte entered a CCS entry which provided:
JACKET ENTRY: COURT HAVING REVIEWED [AFC’S] RESPONSE
TO RULE 41(E) NOTICE HEREBY ORDERS THAT CAUSE IS RE-
INSTATED ON COURT’S ACTIVE DOCKET. NOTICE TO
ATTORNEYS.
Id. at 3.
On July 12, 2011, Somerville filed a Verified Motion to Reconsider and Vacate
Order Reinstating This Case arguing that the July 6, 2011 order was void because
“Indiana decisional authority and Rule 41(F) are clear that a Trial Rule 41(E) dismissal,
with prejudice, can only be granted upon a showing by [AFC] satisfying Trial Rule
60(B).” Id. at 35. Somerville’s motion also stated that, “[a]lthough not directly relevant
to this Motion, it should be noted that the Court’s reliance on AFC’s response to Rule
41(E) notice to reinstate this case may be mistaken” and that “Somerville has not had an
opportunity to respond substantively to AFC’s assertion that this case is ‘active’ . . . .”
Id. at 38.
On July 25, 2011, AFC filed a Verified Response to Somerville’s Motion to
Reconsider arguing in part that the court had the authority to enter the July 6, 2011 order
under Trial Rule 60(A) because the “June 28, 2011 order appears to have been based on
5
an oversight or omission—namely the Court’s mistaken belief that AFC did not appear at
the appointed date and time to show cause why the case should remain active” and “once
the Court learned that the assumption on which it based its June 28 order was incorrect, it
entered a corrective order reinstating the case.” Id. at 43. AFC also argued that the June
28, 2011 order dismissing the case was entered even though no Trial Rule 41(E) hearing
was held on June 27, 2011, that Trial Rule 41(E)’s hearing requirement is essential and
mandatory under the rule, and that the court’s dismissal order was erroneous and the
court acted appropriately in correcting the error.
Somerville filed a reply on July 27, 2011, arguing that motions under Trial Rule
60(A) are not to be used for purposes of correcting errors of substance, that the order
dismissing the case cannot be described as one which is clerical in nature, and that a
dismissal with prejudice may be set aside only in accordance with the provisions of Trial
Rule 60(B) as required by Trial Rule 41(F). Somerville also argued that “[w]hen a court
orders a hearing and notice of the hearing is sent to the plaintiff, the hearing requirement
of Trial Rule 41(E) is satisfied, regardless of whether the plaintiff or his counsel attends
the hearing.” Id. at 52.
On September 7, 2011, the court held a hearing on the motion to reconsider. At
the hearing, the court stated:
[L]et’s just get it on the record. . . . I was here that morning. . . . And if it
had been reported to me by my staff that you gentlemen were here for this
hearing, believe me, we would have conducted a 41(E) hearing.
But what happened, in essence, is exactly what [AFC’s counsel]
described. It was reported to me upon submission of [Somerville’s
6
counsel’s] proposed order dismissing the case with prejudice that no one
appeared on behalf of [AFC] that morning, which is not accurate.
And as a result thereof, I reviewed the proposed and tendered order
and obviously I signed off on it.
And it was only then, as the record reflects and you gentlemen are
well aware, days later that I became aware of the response [AFC] filed that
day on the 27th, entered by the clerk I think on the 29th, and then probably
brought to my attention a day or two later. You know, we had the three day
holiday weekend. And obviously upon my review of what [AFC] had, in
fact, filed on that day, I sua sponte, without question, entered the order
reinstating the cause.
Wow. What interesting arguments honestly that are technically
being made in this matter that I have never been asked to consider because
frankly I’ve never been in a situation like this.
I’m going to need to take a look at it because my first reaction is
clerical? Not really. Boy. We’re talking substantive. When I’m reinstating
a case that’s been dismissed with prejudice and you look at the language in
Trial Rule 41 and its pretty straightforward about if you have a dismissal
with prejudice, you look at 60(B).
I guess that’s why I’m wondering – I suggest at the outset, you
know, if I ultimately grant your motion, you file the 60(B) maintaining a
mistake – granted not your mistake. And I don’t know why it’s necessarily
to be interpreted to be your mistake.
*****
You know, frankly, if we’d had the 41(E) hearing that morning, I
think I know, in fact, what I would have been inclined to do and this case
would likely have been allowed to proceed quite frankly.
Transcript at 30-32, 34. The court took the matter under advisement.
On September 9, 2011, the court issued an order denying Somerville’s motion to
reconsider stating in part:
The Court’s June 28, 2011 order was based on an oversight or omission—
namely the Court’s mistaken belief that AFC did not appear at the
7
appointed date and time to show cause why the case should remain active.
Once the Court learned that the assumption on which it based its June 28
order was incorrect, it entered a corrective order reinstating the case. Rule
60(A) allows a court on its own initiative to correct clerical mistakes and
oversights or omissions which plague a judgment. Sarna v. Norcan Bank,
530 N.E.2d 113 (Ind. Ct. App. at 1988)[, reh’g denied, trans. denied].
There were several oversights or omissions plaguing the Court’s dismissal
order of June 28, 2011, including but not limited to the Court’s failure to
afford the parties a hearing as provided by Rule 41(E). No hearing
preceded the Court’s erroneous dismissal order in this case despite the
arrival and appearance by counsel for AFC and [Somerville] on the
morning of June 27, 2011. Therefore, the dismissal order of June 28, 2011
was improper and the Court corrected the error by vacating its June 28
order sua sponte by jacket entry to that effect.
Appellants’ Appendix at 12. The court also rescheduled a hearing under Trial Rule 41(E)
for October 27, 2011. Following that hearing, the court took the matter under
advisement, and on October 31, 2011, set the cause for trial.
Summary Judgment Proceedings
On November 1, 2012, AFC filed a motion for partial summary judgment with
respect to Counts I and II of the complaint together with designated evidence and a brief
in support of the motion. On December 12, 2012, Somerville filed a brief and
designation of materials in opposition to AFC’s summary judgment motion. On January
10, 2013, AFC filed a reply. Following a hearing, the court entered an order on February
5, 2013, finding that AFC is entitled to partial summary judgment against Somerville and
Souza. Somerville filed a motion to reconsider the ruling, and after a hearing the court
denied the motion.
On May 14, 2013, AFC filed a motion to voluntarily dismiss Count III of the
complaint and for entry of judgment on Counts I and II. On June 3, 2013, the court
8
entered a Final Judgment in favor of AFC and against Somerville and Souza in the
principal amount of $89,331.63, plus pre-judgment interest in the amount of $90,757.69
through May 14, 2013, plus pre-judgment interest at the rate of $23.57 per day from that
date through the date of judgment. The court later issued an order that Somerville pay
AFC attorney fees in the amount of $51,446.45.
DISCUSSION
I.
The first issue is whether the trial court abused its discretion in sua sponte placing
the cause of action on the active docket on July 6, 2011, after it had dismissed the action
on its own motion on June 28, 2011, pursuant to Ind. Trial Rule 41(E). Trial Rule 41(E)
provides in part:
[W]hen no action has been taken in a civil case for a period of sixty [60]
days, the court, on motion of a party or on its own motion shall order a
hearing for the purpose of dismissing such case. The court shall enter an
order of dismissal at plaintiff’s costs if the plaintiff shall not show sufficient
cause at or before such hearing.
Trial Rule 41(F) provides: “For good cause shown and within a reasonable time the court
may set aside a dismissal without prejudice. A dismissal with prejudice may be set aside
by the court for the grounds and in accordance with the provisions of Rule 60(B).”
Ind. Trial Rule 60(A) provides:
Of its own initiative or on the motion of any party and after such notice, if
any, as the court orders, clerical mistakes in judgments, orders or other
parts of the record and errors therein arising from oversight or omission
may be corrected by the trial court at any time before the Notice of
Completion of Clerk’s Record is filed under Appellate Rule 8.
9
Trial Rule 60(B) provides in part that “[o]n motion and upon such terms as are just
the court may relieve a party or his legal representative from a judgment, including a
judgment by default, for the following reasons: (1) mistake, surprise, or excusable
neglect, . . . (6) the judgment is void . . . ,” or “(8) any reason justifying relief from the
operation of the judgment, other than those reasons set forth in subparagraphs (1), (2),
(3), and (4).” A movant filing a motion for reasons under Trial Rule 60(B)(1) and (8)
must allege a meritorious claim or defense. Trial Rule 60(B).
Somerville asserts that the trial court erroneously reinstated the case because Trial
Rule 41(F) requires a Trial Rule 60(B) motion before reinstating a case dismissed with
prejudice, and AFC did not file a Trial Rule 60(B) motion. Somerville argues that Trial
Rule 60(A) cannot provide relief from a dismissal with prejudice because the dismissal
was not a clerical mistake or clerical or mechanical in nature and that motions under the
rule are not to be used for purposes of correcting errors of substance. Somerville also
contends that the fact that a hearing was not conducted is not a basis for reinstatement
because the court had ordered a hearing.
AFC maintains that the case was properly reinstated after being mistakenly
dismissed. Specifically, AFC argues that Trial Rule 41(F) does not limit a trial court’s
authority to take corrective action under Trial Rule 60(A), that where there is an error
arising from oversight the court has the authority to correct the record pursuant to Trial
Rule 60(A), that the court’s failure to hold a hearing under Trial Rule 41(E) rendered the
dismissal order void, and that the case would have been reinstated under Trial Rules
60(B)(1) and (6) and thus any error in reinstating under Trial Rule 60(A) was harmless.
10
In its reply brief, Somerville asserts that AFC’s argument that the dismissal order
is void due to the lack of an actual hearing fails because AFC was accorded all of the due
process rights to which it was entitled, namely, notice and an opportunity to be heard.
We review the court’s order for an abuse of discretion. Baker & Daniels, LLP v.
Coachmen Indus., Inc., 924 N.E.2d 130, 136 (Ind. Ct. App. 2010) (“A trial court’s
decision to reinstate a case pursuant to Trial Rule 41(F) is reviewed for an abuse of
discretion . . . .”), trans. denied; Thomas v. Thomas, 674 N.E.2d 23, 25 (Ind. Ct. App.
1996) (stating standard of review related to grant of motion for relief under Trial Rule
60(A)), reh’g denied, trans. denied. The trial court abuses its discretion when the
judgment is clearly against the logic and effect of the facts and circumstances, as well as
the reasonable inferences to be drawn therefrom. Thomas, 674 N.E.2d at 25. We must
affirm if there is any legal ground in the record supporting the judgment, even if the trial
court provides erroneous reasons for its ruling. Id.; see Estate of Lee ex rel. McGarrah v.
Lee & Urbahns Co., 876 N.E.2d 361, 367 (Ind. Ct. App. 2007) (noting “we will affirm
the ruling if it is sustainable on any legal basis in the record, even though this was not the
reason enunciated by the trial court”).
A. Trial Rule 41(E) Hearing Requirement
The trial court did not conduct a hearing as contemplated by Ind. Trial Rule 41(E)
prior to entering its June 28, 2011 order dismissing the case. Rule 41(E) provides that
“the court, on motion of a party or on its own motion shall order a hearing for the purpose
of dismissing such case” and that the court may enter an order of dismissal “if the
plaintiff shall not show sufficient cause at or before such hearing.” The Indiana Supreme
11
Court and this Court have held that a court must generally hold a hearing prior to entering
an order of dismissal under Trial Rule 41(E). See Wright v. Miller, 989 N.E.2d 324, 328
n.3 (Ind. 2013) (citing Rumfelt v. Himes, 438 N.E.2d 980, 983-984 (Ind. 1982), and
providing that “in light of the gravity of the sanction of dismissal, we believe that the
hearing required by Trial Rule 41(E) should henceforth likewise be held when a case
dismissal is sought or contemplated under Trial Rule 37”); Rumfelt, 438 N.E.2d at 983-
984 (holding that the trial court’s order dismissing the action with prejudice “wholly
fail[ed] to comply with the clear dictates of the rule requiring a hearing” and that “Trial
Rule 41(E) clearly requires a hearing on a motion to dismiss which controls over Trial
Rule 73 allowing the trial court to expedite its business by directing the submission and
determination of motions without oral hearing,” and remanding with instructions to order
a hearing on the motion to dismiss under Rule 41(E)); Hatfield v. Edward J. DeBartolo
Corp., 676 N.E.2d 395, 400 (Ind. Ct. App. 1997) (noting that Rule 41(E) specifically
requires a hearing), reh’g denied, trans. denied; Moore v. Terre Haute First Nat. Bank,
582 N.E.2d 474, 478 (Ind. Ct. App. 1991) (“The Rumfelt and Nichols decisions
unmistakably require an adversarial hearing because the plain language of T.R. 41(E)
requires the plaintiff be given an opportunity to be heard.”), reh’g denied; Nichols v. Ind.
State Highway Dep’t, 491 N.E.2d 227, 228 (Ind. Ct. App. 1986) (“Dismissal under T.R.
41(E) without such a hearing was an improper procedure.”); Fulton v. Van Slyke, 447
N.E.2d 628, 634 n.7 (Ind. Ct. App. 1983) (“Under our rules of civil procedure, [] Trial
Rule 41(E), a dismissal against the plaintiff for failure to comply with the rules or when
12
no action has been taken in a civil case for a period of 60 days must be preceded by a
hearing, Rumfelt v. Himes . . . .”).
Somerville points to two of this court’s opinions stating that the hearing
requirement in Trial Rule 41(E) is satisfied when the trial court orders a hearing. See
Appellants’ Brief at 16; Appellants’ Reply Brief at 5 (citing Metcalf v. Estate of
Hastings, 726 N.E.2d 372, 374 (Ind. Ct. App. 2000) (stating that, when the court orders a
hearing and notice of the hearing date is sent to the plaintiff, the hearing requirement of
Rule 41(E) is satisfied), trans. denied, and Ind. Dep’t of Natural Resources v. Ritz, 945
N.E.2d 209, 212, 213 n.3 (Ind. Ct. App. 2011) (noting the statement in Metcalf above in a
footnote but also observing in reciting the facts that, with respect to the cause subject to
dismissal for failure to prosecute under Trial Rule 41(E), the trial court conducted a
hearing prior to entering a dismissal of the cause), reh’g denied, trans. denied). In
Metcalf, the court scheduled a telephonic hearing under Trial Rule 41(E), the plaintiff’s
counsel was unable to reach a telephone until after the scheduled time of the hearing, and
the court later dismissed the action. Metcalf, 726 N.E.2d at 373. On appeal, the plaintiff
argued the court erred by dismissing the case without holding a hearing, and this court
stated that “when the court orders a hearing and notice of the hearing date is sent to the
plaintiff, the hearing requirement of T.R. 41(E) is satisfied, regardless of whether the
plaintiff or his counsel attends the hearing,” noted that the plaintiff’s counsel did not
participate in the hearing and made no effort to reschedule the hearing and that the court
had entered the dismissal sixty days after the scheduled hearing, and held that the
plaintiff had an opportunity to respond “sufficient to satisfy the hearing requirement of
13
Rule 41(E)” and thus that the trial court did not err in dismissing the case without holding
an adversarial hearing. Id. at 374. Counsel for the plaintiff in Metcalf did not appear for
the scheduled hearing under Trial Rule 41(E) and was given sufficient time to show cause
why the case should not be dismissed but failed to do so. This case is distinguishable
from Metcalf.
The hearing requirement of Trial Rule 41(E) was not satisfied here where the
parties appeared by counsel for the hearing to present arguments but the court did not
hear their arguments. AFC filed its Response to Rule 41(E) Notice on the same day as
the scheduled hearing arguing the case should not be dismissed. Contrary to Somerville’s
argument, AFC did not have an opportunity to be heard prior to the entry of the court’s
order of dismissal. Under these circumstances and in the light of the requirements of
Trial Rule 41(E) as interpreted by our Courts, the trial court was required to hold a
hearing under Trial Rule 41(E) prior to dismissing the cause of action. The trial court
acknowledged this and stated that it had dismissed the case based upon the mistaken
belief that AFC did not appear at the appointed date and time to show cause why the case
should remain active and that the hearing should have been held. We agree with the trial
court that the hearing requirement of Trial Rule 41(E) was not satisfied prior the entry of
dismissal, and this supports the trial court’s conclusion that the June 28, 2011 entry of
dismissal was erroneous.
B. Trial Rule 60(A)
We next address the court’s order placing the cause of action back on the active
docket. While the court’s July 6, 2011 order reinstating the case did not specifically
14
provide the legal grounds for the reinstatement, the court’s September 9, 2011 ruling on
Somerville’s motion to reconsider cited Ind. Trial Rule 60(A) and found there were
several oversights or omissions plaguing the June 28, 2011 dismissal order. In reviewing
the court’s decision, we will affirm on any basis supported by the record even if the
reason is different than the one enunciated by the trial court. See Estate of Lee, 876
N.E.2d at 367; Thomas, 674 N.E.2d at 25. With this tenet in mind, we turn to the court’s
decision to reinstate the cause of action.
The language of Trial Rule 60(A) permits a court on its own initiative to correct
“clerical mistakes in judgments, orders or other parts of the record and errors therein
arising from oversight or omission” at “any time before the Notice of Completion of
Clerk’s Record is filed under Appellate Rule 8.” This Court has said that, in the context
of Trial Rule 60(A), “clerical error” has been defined as “a mistake by a clerk, counsel,
judge, or printer that is not a result of judicial function and cannot reasonably be
attributed to the exercise of judicial consideration or discretion.” KeyBank Nat’l Ass’n v.
Michael, 770 N.E.2d 369, 375 (Ind. Ct. App. 2002), trans. denied. “The purpose of T.R.
60(A) is to recognize that in the case of clearly demonstrable mechanical errors the
interests of fairness outweigh the interests of finality which attend the prior adjudication.
On the other hand, where the ‘mistake’ is one of substance the finality principle
controls.” Rosentrater v. Rosentrater, 708 N.E.2d 628, 631 (Ind. Ct. App. 1999)
(emphasis added) (quoting Sarna, 530 N.E.2d at 115) (internal quotation marks omitted)).
In other words, if the error is purely mechanical, the trial court retains the authority, by
15
virtue of Rule 60(A), to modify its erroneous order. If the error is substantive, a Trial
Rule 60(A) motion may not be used to correct it.
We observe that, while the dismissal order here is not the result of a typographical
error and involves a dismissal which, as Somerville notes, was an appealable order, we
note that Trial Rule 60(A) by its terms does not preclude a trial court from correcting
mistaken orders which are appealable orders. See Trial Rule 60(A) (noting the court may
correct an order “any time before the Notice of Completion of Clerk’s Record”). While
the court’s mistake in this case—believing the parties did not appear to present arguments
at the June 27, 2011 hearing—was not a fact expressly stated in the order of dismissal,
the record shows and the trial court found that the order was based solely upon the court’s
mistake or oversight. We find that the court’s mistaken belief, where the parties
suggested in their filings and briefs that the mistake was the result of an oversight or a
miscommunication between or actions taken by members of the court’s staff, is more
akin to a mechanical mistake than a substantive mistake in character.
Further, we view dismissals with disfavor, and dismissals are considered extreme
remedies that should be granted only under limited circumstances. Turner v. Franklin
Cnty. Four Wheelers Inc., 889 N.E.2d 903, 905 (Ind. Ct. App. 2008). The sanction of
dismissal under Rule 41(E) without first holding a hearing would be an extreme penalty,
especially where the party’s counsel appeared for the hearing and filed a Response to
Rule 41(E) Notice on the day of the scheduled hearing. We also observe that Ind. Code §
33-23-2-4 provides: “All courts retain power and control over their judgments for ninety
(90) days after rendering the judgments in the same manner and under the same
16
conditions as they retained power and control during the term of court in which the
judgments were rendered.” The trial court’s order setting aside the order of dismissal in
this case was entered eight days after its entry of the order of dismissal, and the court’s
authority under Ind. Code § 33-23-2-4 was not limited by or inconsistent with its
obligations under Trial Rule 60.
In light of the breakdown in communications between the court, its staff, and
counsel representing the parties, the fact that the hearing requirement of Trial Rule 41(E)
was not satisfied prior to the entry of dismissal, the trial court’s subsequent statements
that it would not have dismissed the case without first holding a hearing had it been
aware that counsel for the parties were present for the hearing, and our preference for
deciding cases on their merits, we cannot say that the trial court abused its discretion in
setting aside the order of dismissal on the basis of Trial Rule 60(A), and consistent with
Ind. Code § 33-23-2-4.
II.
The next issue is whether the trial court erred in entering summary judgment in
favor of AFC and against Sommerville. Summary judgment is appropriate only where
there is no genuine issue of material fact and the moving party is entitled to judgment as a
matter of law. Ind. Trial Rule 56(C); Mangold ex rel. Mangold v. Ind. Dep’t of Natural
Resources, 756 N.E.2d 970, 973 (Ind. 2001). All facts and reasonable inferences drawn
from those facts are construed in favor of the nonmovant. Mangold, 756 N.E.2d at 973.
Our review of a summary judgment motion is limited to those materials designated to the
trial court. Id. In reviewing a trial court’s ruling on a motion for summary judgment, we
17
may affirm on any grounds supported by the Indiana Trial Rule 56 materials. Catt v. Bd.
of Commr’s of Knox Cnty., 779 N.E.2d 1, 3 (Ind. 2002). The entry of specific findings
and conclusions does not alter the nature of a summary judgment which is a judgment
entered when there are no genuine issues of material fact to be resolved. Rice v. Strunk,
670 N.E.2d 1280, 1283 (Ind. 1996). In the summary judgment context, we are not bound
by the trial court’s specific findings of fact and conclusions of law. Id. They merely aid
our review by providing us with a statement of reasons for the trial court’s actions. Id.
We review a summary judgment order de novo. Bules v. Marshall Cnty., 920 N.E.2d
247, 250 (Ind. 2010).
Somerville asserts that the court erroneously granted summary judgment because
there is a question of fact as to whether Merenciano’s actions reasonably put AFC on
notice that his actions were unauthorized. Somerville argues that, even assuming the
court properly determined that the agency letter manifested Somerville’s intent to appoint
Merenciano as its agent to buy vehicles and access its AFC credit line to do so, the
designated facts show that subsequent transactions did or should have given rise to a
reasonable belief that Merenciano was not acting for the benefit of Somerville. In
support of its argument, Somerville points to the facts that, when AFC conducted a field
audit, it dealt solely with Merenciano at his dealership at a different address than
Somerville’s dealership, that AFC did not visit Somerville’s dealership during the year in
which the transactions in question occurred, that AFC increased Somerville’s credit limit
in order to accommodate Merenciano’s transactions without first obtaining Somerville’s
authorization and allowed Merenciano to exceed that credit limit, and that AFC accepted
18
checks from Merenciano that came from accounts that Somerville never disclosed to
AFC during the application process.
AFC maintains that it reasonably believed that Somerville’s agent had the
authority to bind Somerville and thus that the court did not err in granting summary
judgment in favor of AFC. AFC argues that Souza executed an agency letter which
expressly authorized Merenciano to act as its agent during the time purchases at issue in
this case occurred. AFC further argues that the evidence does not show that AFC knew
or should have known that Somerville resided at only one address or used only one bank
account and does not show that AFC was aware or was informed that Somerville
conducted business from only one location or had only one appropriate address. AFC’s
position is that there was no limitation as to the place, address, or bank account
Merenciano was required to use when conducting business on behalf of Somerville.
In its reply brief, Somerville argues that “[t]he only way AFC’s argument works is
if this Court construes the Agency Letter as virtually unlimited in the authority it bestows
on Merenciano and at the same time absolves AFC of any duty to question Merenciano’s
actions” when these actions were clearly “not to buy and sell automobiles on
Somerville’s behalf.” Appellants’ Reply Brief at 8.
The Indiana Supreme Court has described apparent authority as follows:
Apparent authority is the authority that a third person reasonably
believes an agent to possess because of some manifestation from his
principal. The necessary manifestation is one made by the principal to a
third party, who in turn is instilled with a reasonable belief that another
individual is an agent of the principal. It is essential that there be some
form of communication, direct or indirect, by the principal, which instills a
reasonable belief in the mind of the third party. Statements or
19
manifestations made by the agent are not sufficient to create an apparent
agency relationship.
Gallant Ins. Co. v. Isaac, 751 N.E.2d 672, 676-677 (Ind. 2001) (quoting Pepkowski v.
Life of Ind. Ins. Co., 535 N.E.2d 1164, 1166-1167 (Ind. 1989)) (internal citations
omitted). The “manifestations” need not be in the form of direct communications, “but
rather the placing of the agent in a position to perform acts or make representations which
appear reasonable to a third person is a sufficient manifestation to endow the agent with
apparent authority.” Gallant, 751 N.E.2d at 677 (citation omitted). Generally, the
question of whether an agency relationship exists is a question of fact. Cain Family
Farm, L.P. v. Schrader Real Estate & Auction Co., Inc., 991 N.E.2d 971, 977 (Ind. Ct.
App. 2013) (citing Douglas v. Monroe, 743 N.E.2d 1181, 1187 (Ind. Ct. App. 2001)).
However, if the evidence is undisputed, there are times when summary judgment is
appropriate in agency cases. Id.
The designated evidence includes the October 2002 Agreement and Souza’s
guaranty and shows that Somerville could request advances against a line of credit under
the Agreement to finance its purchase of automobiles for resale. The Agreement includes
various provisions regarding financing including applicable interest rates, floorplan fees,
processes to request and conditions to advances, repayment of Somerville’s obligations,3
the collateral and AFC’s security interest, covenants regarding maintenance of collateral,
records requirements, notice obligations, Somerville’s obligations regarding insurance
3
With respect to the repayment of purchase money inventory obligations, Somerville agreed with
some exceptions to pay AFC within forty-eight hours after the disposition of an item of purchase money
inventory.
20
and taxes, various representations and warranties by Somerville related to ownership and
licensing, and events of default and remedies.
The designated evidence also includes a Representation Authorization Letter
executed by Souza on behalf of Somerville, dated February 24, 2006, stating that
Merenciano was “authorized to buy and sell automobiles for [Somerville] and, in
connection therewith, to execute company checks or drafts and any other necessary
instruments or documents on behalf of said dealership at any Subscribing Customer[4]
where [Somerville] currently does or may do business until such time as [Somerville]
provides written notice of termination of authorization . . . .” Appellants’ Appendix at
67. On February 20, 2007, Somerville executed a Representation Removal Letter stating
that it wished to remove Merenciano from its account with all Auction ACCESS
Subscribing Customers where Somerville conducted business and that Merenciano was
no longer authorized to conduct business on behalf of Somerville. Between February
2006 and February 2007, Merenciano purchased fifteen automobiles and requested AFC
to make advances under the Agreement, and AFC approved the requests and made the
advances. The financing was requested or approved in the months of September 2006
through January 2007, and Somerville failed to timely repay its debt with respect to these
automobiles.
In his affidavit, Souza stated that it was his understanding that, by executing the
Representative Authorization Letter, he “granted access to [] Merenciano under [his]
4
The letter also stated: “[Somerville] wishes to authorize and register, as of the date listed below,
the following person as an Authorized Representative at all Auction ACCESS subscribing customers
(‘Subscribing Customers’) where [Somerville] is registered to do business.” Appellants’ Appendix at 67.
21
Dealership ID with Auction ACCESS to certain vehicle auctions” and that “[i]t was never
[his] understanding and intention that by executing the [letter that he] authorized []
Merenciano access to Somerville’s floor plan financing with AFC.” Id. at 103-104.
Souza stated that he was aware that Merenciano operated a used car dealership by the
name of “Mega Auto Sales” at an address on Cambridge Street and that Somerville has
never conducted business at the Cambridge Street address. Id. at 105. Souza further
stated that he reviewed AFC’s internal documents describing audits conducted by AFC
pursuant to the Agreement, that many of the audits indicated discussions with
Merenciano, and that not one of the audits included a visit to Somerville’s place of
business or discussion with Souza.
Souza also stated that Somerville’s financial institution was Citizens Bank, that
three checks signed by Merenciano made payable to AFC were from an account at
Winter Hill Bank, and that each of those checks were returned for insufficient funds.
Souza also stated that Somerville’s credit line was initially $50,000 and that the credit
line was increased to $100,000 in 2003 and $150,000 in 2005. Somerville designated
evidence that each of these increases were authorized by an Aggregate Advance Limit
Amendment to the Agreement signed by Souza on behalf of Somerville. Souza stated in
his affidavit that, “sometime after September 13, 2006, Somerville’s credit line was
increased from $150,000 to $200,000” and that “[n]either Somerville nor I authorized any
increase in Somerville’s credit line with AFC, beyond the $150,000 I approved on
October 5, 2005.” Id. at 106-107. Souza also stated that he learned in early 2007 from a
manager at AFC the extent of the unauthorized obligations incurred on Somerville’s floor
22
plan with AFC, that he told AFC that he believed Somerville was not obligated to pay for
debt incurred by Merenciano without his knowledge or consent, and that he reported
Merenciano’s unauthorized use of Somerville’s line of credit to the police.
We find that AFC demonstrated that it reasonably believed Merenciano possessed
the authority to act as an agent of Somerville for the purpose of purchasing vehicles using
the financing available to Somerville under the Agreement. As evidenced by the
February 24, 2006 Representation Authorization Letter, Somerville authorized
Merenciano to buy and sell automobiles on its behalf and to execute any necessary
documents in order to do so, and the authorization was revoked in February 2007.
Somerville entered the Agreement in order to obtain a line of credit to purchase vehicles,
and the designated evidence does not establish that Somerville’s agents including
Merenciano were not permitted, or that AFC was aware that Somerville’s agents were not
permitted, to use the available financing to purchase vehicles. The facts that the address
of Merenciano’s dealership was different than the address identified by Somerville as its
place of business or as its address for purposes of notice, and that checks signed by
Merenciano were from an account at a bank other than the bank identified by Somerville
as its financial institution, do not establish that AFC should have reasonably known that
Merenciano lacked the authority to purchase vehicles using the financing available under
the Agreement, as a borrower may have more than one location or bank account.5 AFC
5
The Agreement defines “Dealer’s Place of Business” as “any or all of the following locations:
(a) the place where the Collateral and Dealer’s books and records are kept; (b) the place from which
Dealer’s business affairs and operations are conducted; and (c) the place where Dealer’s registered office
is located.” Appellants’ Appendix at 57.
23
designated evidence of facts showing that Somerville placed Merenciano in a position to
perform acts on its behalf which appeared reasonable to a third party, and Somerville has
not designated evidence of facts showing the existence of a genuine issue of material fact
on the question of apparent authority.
Based upon the record, we conclude that AFC demonstrated that it reasonably
believed that Merenciano was an agent of Somerville for the purpose of purchasing
vehicles using the line of credit or financing made available to Somerville by AFC
pursuant to the Agreement. See Gallant, 751 N.E.2d at 677-678 (holding that the
evidence showed that Thompson-Harris had apparent authority to bind Gallant, that is,
“Gallant’s dealings with Isaac [] contained the manifestations required [] to cause Isaac
reasonably to believe that Thompson-Harris had authority to bind Gallant”); Cain Family
Farm, 991 N.E.2d at 978-979 (holding that Cain Family Farm did not designate evidence
of facts showing the existence of a genuine issue of material fact on the question of
apparent authority, that Cain Family Farm “placed Candace in a position to perform acts
appearing reasonable to a third person such as Drerup, including executing the Antlers
Ridge Purchase Agreement, and their action in doing so was sufficient to endow Candace
with apparent authority,” and that Candace had apparent authority, as a matter of law, to
execute the Purchase Agreement). Accordingly, the trial court did not err in granting
summary judgment in favor of AFC and against Somerville.6
CONCLUSION
6
Because we find that summary judgment in favor of AFC was proper based upon principles of
apparent authority as found by the trial court, we need not address Somerville’s argument that summary
judgment would not be proper based upon principles of judicial estoppel.
24
For the foregoing reasons, we affirm the trial court’s orders placing the cause of
action on the active docket and granting summary judgment in favor of AFC.
Affirmed.
BARNES, J., and ROBB, J., concur.
25