Byrd v. Mortenson , 60 N.C. App. 85 ( 1982 )

ARNOLD, Judge.

Defendants’ primary attack on appeal is on the trial judge’s refusal to set aside the defaults against them.

For the entry of a default to be disturbed, as those entered by the Clerk of Superior Court on 3 and 6 April in this case, G.S. 1A-1, Rule 55(d) requires that “good cause” be shown. That determination is in the trial judge’s discretion and will not be disturbed absent an abuse of discretion. Frye v. Wiles, 33 N.C. App. 581, 235 S.E. 2d 889 (1977). Crotts v. Pawn Shop, 16 N.C. App. 392, 192 S.E. 2d 55, cert. denied 282 N.C. 425, 192 S.E. 2d 835 (1972).

This Court follows the principle that “[i]nasmuch as the law generally disfavors default judgments, any doubt should be resolved in favor of setting aside an entry of default so the case may be decided on its merits.” Peebles v. Moore, 48 N.C. App. 497, 504-5, 269 S.E. 2d 694, 698 (1980), modified 302 N.C. 351, 275 S.E. 2d 833 (1981). At the same time “the rules which require responsive pleadings within a limited time serve important social goals, and a party should not be permitted to flout them with impunity.” Acceptance Corp. v. Samuels, 11 N.C. App. 504, 510, 181 S.E. 2d 794, 798 (1971).

Two decisions strongly support defendants’ position here. In Whaley v. Rhodes, 10 N.C. App. 109, 177 S.E. 2d 735 (1970), the Court set aside entry of a default under Rule 55(d). The default had been entered after the defendant failed to answer plaintiffs complaint. Whaley found that the defendant showed “good cause” for failure to file an answer because he had turned the plaintiff’s complaint over to his insurance agent “who assured him that . . . the insurance company . . . would take care of the matter. . . .” 10 N.C. App. at 109, 177 S.E. 2d at 736.

In the recent case of Peebles, the Court set aside entry of default on facts analogous to this case. That decision was based on the insurer’s misplacing of the insured’s file, which resulted in an answer being filed seven days late. Peebles concluded “defendant’s failure timely to file his answer was due to an inadvertence on the part of defendant’s insurer . . . .” 48 N.C. App. at 507, 269 S.E. 2d at 700.

Although defendant here did not turn over a copy of the complaint to his insurer, he took sufficient action to justify setting aside the defaults against him. First, he immediately contacted his insurer when he learned of the suit. Second, he forwarded all relevant medical and office records to the insurer in a timely manner. Third, he acted in conformity with his insurer’s instructions, which was a reasonable response given the insurer’s superior expertise in these matters. It should also be noted that his lawyer immediately contacted the Clerk of Superior Court’s office to enter an appearance when he discovered that he was the defendant’s counsel.

The cases cited by plaintiff do not appear to be dispositive on the default issue. For example, Howell v. Haliburten, 22 N.C. App. 40, 205 S.E. 2d 617 (1974), is distinguishable on the facts. In that case, the insurer waited ten months after receiving notice of the suit before contacting local counsel to take care of the matter. The time lapse was much shorter here. Britt v. Georgia-Pacific Corp., 46 N.C. App. 107, 264 S.E. 2d 395 (1980), is also not determinative since the delay there was caused by the defendant’s in-house legal department misplacing the papers.

In Peebles, the court reversed the trial court’s refusal to set aside an entry of default on facts similar to those in this case, where defendant’s failure to file a timely answer was due to the insurer’s inadvertence.

Other similarities between Peebles and this case justify following its holding here. The court thought it important, for example, that an answer was filed promptly when the mistake was discovered. In the present case defendants sought “other and further relief as to the court may seem just and proper” in their 15 April motion and sought time to file an answer in a 13 July motion.

Peebles also pointed to a lack of prejudice to the plaintiff and injustice to the defendant as factors in the default decision. The only prejudice to plaintiff here is in the sense that he may have to try a case that he has won without a trial. That, however, is not the type of prejudice that Peebles seeks to avoid. Thus, the injustice to the defendant in not having a review of his defense on the merits with the resultant harm to his reputation and ability to make a living outweighs any possible prejudice to the plaintiff. “[W]e believe that justice will best be served by allowing this case to be tried on its merits.” Peebles, 48 N.C. App. at 507, 269 S.E. 2d at 700.

In Clark v. Clark, 301 N.C. 123, 129, 271 S.E. 2d 58, 63 (1980), our Supreme Court said: “A judge is subject to reversal for abuse of discretion only upon a showing by a litigant that the challenged actions are manifestly unsupported by reason.” Based on the record before us, and in our advantage of hindsight, we cannot say that the trial court’s refusal to set aside the defaults against defendants was not “manifestly unsupported by reason.” As a result, we reverse the trial court’s refusal to set aside the defaults against the defendants.

The defendants’ second assignment of error is that they should have been allowed an extension of time to file an answer. Where a party seeks an extension of time to answer after the expiration of the 30-day limit, the judge may permit the answer if he finds that “the failure to act was the result of excusable neglect.” G.S. 1A-1, Rule 6(b).

In Norris v. West, 35 N.C. App. 21, 239 S.E. 2d 715 (1978), the court upheld a finding of excusable neglect under Rule 6(b) on facts less compelling than these. Relying on a conversation with the deputy sheriff who served him with a copy of the summons and complaint, the defendant in Norris believed that he was only required to get the papers to his insurance agent within 30 days. As a result, the papers did not reach the insurer’s attorney until after the expiration of the stated time to file an answer. If Norris found excusable neglect when the defendant waited 27 days to contact his insurance agent, the requisite excuse is certainly found here where defendant contacted his insurer as soon as he learned of the suit against him. Upon remand, defendant shall be allowed to file an answer in this case.

Reversed and remanded.

Judge WHICHARD concurs. Judge MARTIN dissents.