John W. Judge Co. v. USA Freight, L.L.C. ( 2018 )

[Cite as John W. Judge Co. v. USA Freight, L.L.C., 2018-Ohio-2658.]
IN THE COURT OF APPEALS OF OHIO
SECOND APPELLATE DISTRICT
MONTGOMERY COUNTY
JOHN W. JUDGE COMPANY :
:
Plaintiff-Appellant : Appellate Case No. 27708
:
v. : Trial Court Case No. 2016-CVF-1286
:
USA FREIGHT, LLC : (Civil Appeal from Municipal Court)
:
Defendant-Appellee :
:
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OPINION
Rendered on the 6th day of July, 2018.
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RICHARD A. BOUCHER, Atty. Reg. No. 0033614 and JULIA C. KOLBER, Atty. Reg. No.
0078855, 12 West Monument Avenue, Suite 200, Dayton, Ohio 45402
Attorneys for Plaintiff-Appellant
NATHAN J. STUCKEY, Atty. Reg. No. 0086789, 735 North Limestone Street, Springfield,
Ohio 45503
Attorney for Defendant-Appellee
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WELBAUM, P.J.
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{¶ 1} Plaintiff-appellant, John W. Judge Company (“Judge”), appeals from the
judgment of the Dayton Municipal Court granting defendant-appellee USA Freight, LLC’s
Civ.R. 60(B) motion to vacate a default judgment. In support of its appeal, Judge claims
that the trial erred in granting the motion to vacate because USA Freight failed to establish
that it was entitled to relief under Civ.R. 60(B)(1) on grounds of excusable neglect. For
the reasons outlined below, the judgment of the trial court will be reversed.
Facts and Course of Proceedings
{¶ 2} On March 21, 2016, Judge filed a complaint against USA Freight, LLC (“USA
Freight”) for money damages arising from alleged unpaid engineering services in the
amount of $4,405.05. Judge requested the complaint and summons be served to USA
Freight via certified mail at the address of USA Freight’s registered statutory agent,
Mukhabbat Vasfieva. On March 30, 2016, the trial court received the certified mail
receipt, showing that the complaint and summons had been delivered and signed for by
“Mukhabbat Koch” on March 24, 2016.
{¶ 3} USA Freight failed to file a response to Judge’s complaint within 28 days as
required by Civ.R. 12. Accordingly, on June 22, 2016, Judge moved the trial court to
enter a default judgment in its favor pursuant to Civ.R. 55. On June 29, 2016, the trial
court granted Judge’s motion and entered a default judgment against USA Freight for the
amount requested plus interest and costs. After obtaining a certificate of judgment, on
January 18, 2017, Judge obtained a writ of execution ordering the court bailiff to levy on
the goods and chattels owned by USA Freight.
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{¶ 4} Three weeks after the writ of execution was filed, USA Freight filed a Civ.R.
60(B) motion to vacate the default judgment on grounds that it never received the
complaint and summons and was otherwise unaware of who signed for the certified mail
service. USA Freight attached a supporting affidavit from Baris Koch, who averred that
he was the General Manager of USA Freight and that his father was the owner. Koch
also averred that he did not receive notice of Judge’s complaint until the court’s bailiff
contacted him regarding the writ of execution. Koch further averred that he spoke with
the members and employees of USA Freight to ascertain if anyone affiliated with the
company had signed for service of the complaint and that he was unware of anyone who
had. Lastly, Koch averred that USA Freight had meritorious defenses to Judge’s lawsuit,
which included a claim that USA Freight had paid Judge in full for its services and that
any unpaid amounts were owed by Garrett Day, LLC and/or Mike Heitz.
{¶ 5} In addition to the affidavit, USA Freight attached several invoices from Judge
and copies of checks that USA Freight made payable to Judge. USA Freight also
attached a written description and map of the property on which Judge provided its
engineering services, indicating that Garrett Day, LLC owned part of the property on
which Judge’s services were rendered.
{¶ 6} Judge filed a response opposing the motion to vacate on grounds that USA
Freight failed to establish the necessary elements for such relief under Civ.R. 60(B). The
trial court then held an evidentiary hearing on the motion to vacate. At the hearing, the
parties submitted no additional evidence, but simply gave oral arguments. During that
time, USA Freight explained that the certified mail receipt was signed by the mother of
USA Freight’s owner. USA Freight explained that the owner’s mother is not part of the
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company or involved in its day-to-day operations, but that she happened to be present
when the complaint was served and did not provide it to any of the members of the family
who are involved in the business. USA Freight further explained that the owner’s mother
understands and speaks very little English and has very little knowledge of the legal
system. USA Freight therefore claimed it was entitled to relief under Civ.R. 60(B)(1) for
excusable neglect.1
{¶ 7} At the close of the hearing, the trial court invited the parties to submit post-
hearing memoranda in support of their positions. After receiving the parties’
memoranda, on June 14, 2017, the trial court issued a decision and entry granting USA
Freight’s motion to vacate. In granting the motion, the trial court found excusable
neglect, noting that USA Freight’s conduct was not willful and that it did not exhibit a
disregard for the judicial system. The trial court further found that USA Freight had
demonstrated that it had a meritorious defense to Judge’s claim for money damages.
{¶ 8} Judge now appeals from the trial court’s decision granting USA Freight’s
motion to vacate, raising a single assignment of error for review.
Assignment of Error
{¶ 9} Judge’s sole assignment of error is as follows:
THE TRIAL COURT ERRED IN GRANTING DEFENDANT-APPELLEE’S
CIV.R. 60(B) MOTION TO VACATE JUDGMENT.
{¶ 10} Under its sole assignment of error, Judge contends that the trial court erred
1 USA Freight also alleged that it was entitled to relief under Civ.R. 60(B)(3) for
misrepresentation, but thereafter withdrew that argument and proceeded solely on the
theory of excusable neglect.
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in granting USA Freight’s motion to vacate the default judgment at issue because USA
Freight failed to establish that it was entitled to relief under Civ.R. 60(B). Specifically,
Judge claims that USA Freight failed to establish that it did not respond to Judge’s
complaint due to excusable neglect.
Standard of Review
{¶ 11} “A motion for relief from judgment under Civ.R. 60(B) is addressed to the
sound discretion of the trial court, and that court’s ruling will not be disturbed on appeal
absent a showing of abuse of discretion.” Griffey v. Rajan, 33 Ohio St. 3d 75, 77, 514
N.E.2d 1122 (1987). “ ‘Abuse of discretion’ has been defined as an attitude that is
unreasonable, arbitrary or unconscionable.” AAAA Enterprises, Inc. v. River Place
Community Urban Redevelopment Corp., 50 Ohio St. 3d 157, 161, 553 N.E.2d 597
(1990), citing Huffman v. Hair Surgeon, Inc., 19 Ohio St. 3d 83, 87, 482 N.E.2d 1248
(1985). “It is to be expected that most instances of abuse of discretion will result in
decisions that are simply unreasonable, rather than decisions that are unconscionable or
arbitrary.” Id. “A decision is unreasonable if there is no sound reasoning process that
would support that decision.” Id. “It is not enough that the reviewing court, were it
deciding the issue de novo, would not have found that reasoning process to be
persuasive, perhaps in view of countervailing reasoning processes that would support a
contrary result.” Id.
Civ.R. 60(B)
{¶ 12} In order to obtain relief from a final judgment under Civ.R. 60(B), the movant
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must satisfy a three-prong test. The movant must demonstrate: (1) the party has a
meritorious defense or claim to present if relief is granted; (2) the party is entitled to relief
under one of the grounds stated in Civ.R. 60(B)(1) through (5); and (3) the motion is made
within a reasonable time. GTE Automatic Elec. v. ARC Industries, Inc., 47 Ohio St. 2d
146, 150, 351 N.E.2d 113 (1976). “All of these requirements must be satisfied, and the
motion should be denied if any one of the requirements is not met.” GMAC Mtge., L.L.C.
v. Herring, 189 Ohio App. 3d 200, 2010-Ohio-3650, 937 N.E.2d 1077, ¶ 30 (2d Dist.), citing
Strack v. Pelton, 70 Ohio St. 3d 172, 174, 637 N.E.2d 914 (1994). (Other citation
omitted.)
{¶ 13} If a motion to vacate “ ‘contains allegations of operative facts which would
warrant relief under [Civ.R. 60(B)], the trial court should grant a hearing to take evidence
and verify these facts before it rules on the motion.’ ” Coulson v. Coulson, 5 Ohio St. 3d
12, 16, 448 N.E.2d 809 (1983), quoting Adomeit v. Baltimore, 39 Ohio App. 2d 97, 105,
316 N.E.2d 469 (8th Dist.1974). “Although a movant is not required to support its motion
with evidentiary materials, the movant must do more than make bare allegations that he
or she is entitled to relief.” Kay v. Marc Glassman, Inc., 76 Ohio St. 3d 18, 20, 665 N.E.2d
1102 (1996), citing Rose Chevrolet, Inc. v. Adams, 36 Ohio St. 3d 17, 20, 520 N.E.2d 564
(1988). “Thus, in order to convince the court that it is in the best interests of justice to
set aside the judgment or to grant a hearing, the movant may decide to submit evidentiary
materials in support of its motion.” Id. “ ‘[G]ood legal practice dictates that the movant
must do all that he can to present allegations of operative facts to demonstrate that he is
filing his motion within a reasonable period of time; that he is entitled to relief for one of
the grounds specified in Civil Rule 60(B)(1) through (5); and that he has a valid defense.’ ”
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Liberty Nursing Ctr. of Englewood, Inc. v. Valentine, 2d Dist. Montgomery No. 24685,
2012-Ohio-1096, ¶ 65, quoting Adomeit at 103.
{¶ 14} “Civ.R. 60(B) is a ‘remedial rule to be liberally construed so that the ends of
justice may be served.’ ” Wilson v. Lee, 172 Ohio App. 3d 791, 2007-Ohio-4542, 876
N.E.2d 1312, ¶ 15 (2d Dist.), quoting Kay at 20. Therefore, “[w]here timely relief is
sought from a default judgment and the movant has a meritorious defense, doubt, if any,
should be in favor of the motion so that cases may be decided on their merits.” GTE
Automatic at paragraph three of the syllabus. “Indeed, the law does not favor judgments
by default, and it is ‘a general tenet of Ohio jurisprudence * * * that cases should be
decided on their merits whenever possible.’ ” Wilson at ¶ 15, quoting Hopkins v. Quality
Chevrolet, Inc., 79 Ohio App. 3d 578, 583, 607 N.E.2d 914 (4th Dist.1992).
Excusable Neglect – Civ.R. 60(B)(1)
{¶ 15} Because Judge does not dispute the existence of a meritorious defense or
that USA Freight filed its motion to vacate within a reasonable time, the only issue before
this court is whether it was an abuse of discretion for the trial court to conclude that USA
Freight was entitled to relief under Civ.R. 60(B)(1) on grounds of “excusable neglect.”
{¶ 16} In considering whether neglect is excusable under Civ.R. 60(B)(1), a court
must consider “all the surrounding facts and circumstances.” UBS Real Estate
Securities, Inc. v. Teague, 191 Ohio App. 3d 189, 2010-Ohio-5634, 945 N.E.2d 573, ¶ 28
(2d Dist.), citing Griffey, 33 Ohio St. 3d at 79, 514 N.E.2d 1122. “The phrase ‘excusable
neglect’ in Civ.R. 60(B)(1) ‘is an elusive concept which has been difficult to define and to
apply.’ ” Id., quoting Kay, 76 Ohio St.3d at 20, 665 N.E.2d 1102. The Supreme Court
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of Ohio has determined that neglect is inexcusable when the movant’s inaction “reveals
a complete disregard for the judicial system and the rights of the appellee.” GTE
Automatic, 47 Ohio St. 2d at 153, 351 N.E.2d 113. Accord Kay at 20.
{¶ 17} This court has held that “ ‘[e]xcusable neglect’ in the context of a Civ.R.
60(B)(1) motion generally means the failure to take the proper steps at the proper time,
not in consequence of the party’s own carelessness, inattention, or willful disregard of the
processes of the court, but in consequence of some unavoidable or unexpected
hindrance or accident, or reliance on the care and vigilance of his counsel or on promises
made by the adverse party.” Federal Nat. Mtge. Assn. v. Banks, 2d Dist. Montgomery
No. 12692, 1991 WL 254652, *2 (Dec. 6, 1991). Accord Griffin v. Dream House Mtge.
Corp., 2d Dist. Greene No. 08-CA-45, 2009-Ohio-2178, ¶ 29. Therefore “ ‘[c]ourts
generally find excusable neglect in those instances where there are “unusual or special
circumstances” that justify the neglect of a party or [the party’s] attorney.’ ” Griffin at ¶
30, quoting Hai v. Flower Hosp., 6th Dist. Lucas No. L-07-1423, 2008-Ohio-5295, ¶ 21,
quoting Vanest v. Pillsbury Co., 124 Ohio App. 3d 525, 536, 706 N.E.2d 825 (4th
Dist.1997).
{¶ 18} That said, “the concept of ‘excusable neglect’ must be construed in keeping
with the proposition that Civ.R. 60(B)(1) is a remedial rule to be liberally construed, while
bearing in mind that Civ.R. 60(B) constitutes an attempt to ‘strike a proper balance
between the conflicting principles that litigation must be brought to an end and justice
should be done.’ ” Colley v. Bazell, 64 Ohio St. 2d 243, 248, 416 N.E.2d 605 (1980),
quoting Doddridge v. Fitzpatrick, 53 Ohio St. 2d 9, 12, 371 N.E.2d 214 (1978).
{¶ 19} In this case, the supporting affidavit signed by USA Freight’s General
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Manager, Baris Koch, averred that he first learned of Judge’s lawsuit against USA Freight
when the trial court’s bailiff notified him that a writ of execution had been filed against the
company. The record indicates that the bailiff was ordered to levy execution against
USA Freight on January 18, 2017, and that USA Freight filed its motion to vacate
approximately three weeks later. Koch further averred in his affidavit that he was
unaware of any member or employee of USA Freight who had signed for or received
service of the complaint. As of the date he signed the affidavit, Koch claimed he did not
know who signed for the complaint.
{¶ 20} It was not until the hearing on the motion to vacate that USA Freight
explained, through counsel, that service of the complaint and summons was signed for
by the mother of the owner of USA Freight. USA Freight explained that the owner’s
mother has no role within the company and that she happened to be present when the
complaint was delivered by certified mail. USA Freight further explained that the owner’s
mother understands and speaks very little English and that she did not provide the
complaint to any of the family members who are involved in USA Freight’s business
operations. Although no testimony or affidavits were submitted to verify this information,
the trial court found USA Freight’s explanation credible and that it constituted excusable
neglect under Civ.R. 60(B)(1).
{¶ 21} Judge argues that the trial court’s decision was an abuse of discretion
because USA Freight failed to provide any evidence establishing that the person who
received and signed for the complaint was the non-English speaking mother of USA
Freight’s owner. The owner’s mother did not appear at the hearing and her name was
never disclosed on the record. USA Freight also never disclosed what the owner’s
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mother did with the complaint after she received it. In an effort to establish that the
person who signed for the complaint was not the owner’s mother, Judge provided the trial
court with two prior certified mail receipts with signatures that matched the signature on
the receipt at issue. Judge pointed out that one of the prior receipts indicated that the
signatory was an “Agent” of USA Freight.
{¶ 22} Judge further argues that it was USA Freight’s responsibility to maintain a
valid statutory agent who is designated to receive service of process at the agent’s listed
address. Judge claims that it was indeed neglectful for USA Freight to use an address
where certified mail could be received and mishandled by a non-English-speaking
individual who is not affiliated with USA Freight’s business; however, Judge contends that
such conduct does not constitute excusable neglect. In support of this claim, Judge cites
various cases providing that “[i]nsufficient or negligent internal procedures in an
organization may not compromise excusable neglect and, therefore, they may not support
the vacation of a default judgment.” See, e.g., Middleton v. Luna’s Restaurant & Deli,
L.L.C., 5th Dist. Stark No. 2011 CA 00004, 2011-Ohio-4388, ¶ 31, citing LaKing Trucking,
Inc. v. Coastal Tank Lines, Inc., 3d Dist. Allen No. 1-83-3, 1984 WL 6241 (Feb. 9, 1984)
(summons received in a corporate mail room but lost before being brought to the attention
of the proper office does not rise to excusable neglect) and Miller v. Sybert, 3d Dist.
Auglaize No. 2-84-13, 1985 WL 7351 (July 25, 1985) (ordinary mail delivered to defendant
when mail is accessible to other persons and where it was never picked up by defendant’s
friends while he was out of state does not constitute excusable neglect). Accord Andrew
Bihl Sons, Inc. v. Trembly, 67 Ohio App. 3d 664, 667, 588 N.E.2d 172 (4th Dist.1990)
(ignoring mail for more than three months due to illness and failing to delegate a
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competent agent to handle business affairs does not constitute excusable neglect); Meyer
v. GMAC Mtge., 10th Dist. Franklin No. 06AP-877, 2007-Ohio-5009 (employee’s failure
to forward the complaint to the appropriate corporate department does not constitute
excusable neglect).
{¶ 23} Judge further argues that the mother’s ignorance of the legal process does
not amount to excusable neglect. Boling v. DiMeche & Vlado, Inc., 10th Dist. Franklin
No. 07AP-146, 2007-Ohio-5795, ¶ 15, quoting United Bank & Trust v. Kaufman, 6th Dist.
Wood No. WD-05-074, 2006-Ohio-2346, ¶ 12, citing Buckeye Supply Co. v. Northeast
Drilling Co., 24 Ohio App. 3d 134, 137, 493 N.E.2d 964 (9th Dist.1985) (“ ‘ignorance of
legal requirements or inexperience with legal matters does not constitute excusable
neglect’ ”).
{¶ 24} Having reviewed the record, we find that Judge has presented strong
arguments in support of its position that the trial court abused its discretion in finding
excusable neglect, especially in regards to USA Freight’s responsibility to maintain a valid
statutory agent. “Each limited liability company [such as USA Freight] shall maintain
continuously in this state an agent for service of process on the company.” R.C.
1705.06(A). A limited liability company is required to provide the Ohio Secretary of State
with a written appointment of its statutory agent that sets forth the name of the agent and
the agent’s address in this state. R.C. 1705.06(B)(1)(a) and (C). The Secretary of State
then keeps a record of the statutory agent’s name and address. R.C. 1705.06(C).
{¶ 25} Civ.R. 4.2(G) provides that, to serve a limited liability company, a plaintiff
may direct service of process to “the agent authorized by appointment or by law to receive
service of process[.]” “Certified mail service upon such an agent is effective upon
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delivery, if evidenced by a signed return receipt.” Adams, Babner & Gitlitz, L.L.C. v.
Tartan Dev. Co. (West), L.L.C., 10th Dist. Franklin No. 12AP-729, 2013-Ohio-1573, ¶ 9,
citing Stonehenge Condominium Assn. v. Davis, 10th Dist. Franklin No. 04AP-1103,
2005-Ohio-4637, ¶ 14, citing Mitchell v. Mitchell, 64 Ohio St. 2d 49, 51, 413 N.E.2d 1182
(1980). “Service is valid if ‘any person’ at the address signs for the certified mail, whether
or not the recipient is the defendant’s agent.” Id., quoting Civ.R. 4.1(A)(1)(a); TCC Mgt.,
Inc. v. Clapp, 10th Dist. Franklin No. 05AP-42, 2005-Ohio-4357, ¶ 11.
{¶ 26} Here, Judge served its complaint on USA Freight’s statutory agent via
certified mail at the address on record with the Ohio Secretary of State. The certified
mail was received at the address of USA Freight’s statutory agent and signed for by the
mother of the owner of USA Freight. Under these circumstances, service of the
complaint was valid. However, USA Freight did not receive notice of the complaint
because the mother of USA Freight’s owner mishandled the complaint. This type of
scenario has not been found to constitute excusable neglect. See, e.g., Chicago
Sweeteners, Inc. v. Kantner Group, Inc., N.D.Ohio No. 3:08 CV 1928, 2009 WL 1707927
(June 17, 2009) (finding no excusable neglect where a defendant company was properly
served with a complaint via certified mail to its statutory agent’s address, the certified mail
was received and signed for by an administrative assistant of the defendant company,
who was also the mother of the defendant company’s president, and the mother thereafter
mishandled the complaint so that the defendant company never received notice of it).
{¶ 27} We agree that “[i]nsufficient or negligent internal procedures in an
organization may not compromise excusable neglect and, therefore, they may not support
the vacation of a default judgment.” Middleton, 5th Dist. No. 2011 CA 00004, 2011-Ohio-
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4388 at ¶ 31. Accord Denittis v. Aaron Constr., Inc., 11th Dist. Geauga No. 2011-G-
3031, 2012-Ohio-6213, ¶ 35. In so agreeing, we stress that USA Freight is, by law,
responsible for maintaining a valid statutory agent that is calculated to receive service of
process at the agent’s listed address. Here, USA Freight chose a statutory agent
address where it was possible for a non-English-speaking person who was unaffiliated
with the company to receive important documentation that was served at the address.
Due to USA Freight’s negligence in choosing its statutory agent and/or failure to
implement internal procedures to ensure that documentation served at the statutory
agent’s address was directed to the appropriate person, the complaint at issue was
mishandled by the owner’s mother.
{¶ 28} As previously noted, excusable neglect does not result from the party’s own
carelessness, inattention, or willful disregard of the processes of the court, but in
consequence of some unavoidable or unexpected hindrance or accident. Federal Nat.
Mtge. Assn., 2d Dist. Montgomery No. 12692, 1991 WL 254652 at *2. Had USA Freight
chosen a better statutory agent, or had better procedures been in place for receiving
service of process at the statutory agent’s address, the mishandling of the complaint
would likely have been avoided. Accordingly, the circumstances here do not constitute
an unavoidable or unexpected hindrance or accident.
{¶ 29} While abuse of discretion is an extremely high standard of review that
requires us to find the trial court’s excusable neglect decision unreasonable, we
nevertheless reach that conclusion here. The trial court’s decision was unreasonable
because the mishandling of the complaint was the result of USA Freight’s own
negligence. When a company, such as USA Freight, designates a statutory agent to
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receive service of process, the company should be adequately prepared to receive
service of process at the statutory agent’s address. Although we recognize that Civ.R.
60(B) motions are to be liberally construed in favor of the movant, we nevertheless find
that USA Freight’s negligence in choosing its statutory agent and its procedures for
receiving service of process was in willful disregard of the processes of the court.
Therefore, we narrowly hold that when a company is required by law to maintain a
statutory agent to receive service of process, and when there is successful service of
process via certified mail at the statutory agent’s address that is on record with the Ohio
Secretary of State, the subsequent mishandling of served documents by the person who
signed for and received the documents at the statutory agent’s listed address does not
amount to excusable neglect.
{¶ 30} Judge’s sole assignment of error is sustained.
Conclusion
{¶ 31} Having sustained Judge’s sole assignment of error, the judgment of the trial
court is reversed.
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HALL, J. and TUCKER, J., concur.
Copies mailed to:
Richard A. Boucher
Julia C. Kolber
Nathan J. Stuckey
Hon. Mia Wortham Spells