Burns v. Madden , 271 Ark. 572 ( 1980 )

Frank Holt, Justice.

This appeal results from the trial court’s denying appellant’s motion to quash and vacate a default judgment.

On November 7, 1978, the appellee filed an action against the appellant asserting he had suffered property damages to his building as a result of the negligent operation of an automobile by appellant and that a separate defendant had negligently entrusted the automobile to appellant. On November 13, 1978, a summons was served on him. On January 8, 1979, a default judgment for $5,000, plus costs, was rendered against him. On January 9 a summons, issued 4 days earlier, was served on the separate defendant, the owner of the automobile. On January 23, 1979, a motion to quash service was filed on behalf of both the appellant and the separate defendant. On March 9, 1979, during term time, appellant amended this pleading, seeking to set aside the judgment. The court treated the supplemental pleading as a motion to vacate and, after a hearing, overruled the motion.

We need only to discuss appellant’s contention that the court erred in not setting aside the default judgment for “excusable neglect, unavoidable casualty and other just cause.” Ark. Stat. Ann. § 29-401 (Repl. 1962).^* It is within the sound discretion of the trial court to grant or deny a motion to set aside a default judgment, and the question on appeal is whether there has been an abuse of that discretion. Johnson v. Jett, 203 Ark. 861, 159 S.W. 2d 78 (1952); and § 29-401, supra. Default judgments are not favorites of the law and should be avoided when possible. Winters v. Lewis, 260 Ark. 563, 542 S.W. 2d 746 (1976); and Perry v. Bale Chevrolet Co., 263 Ark. 552, 566 S.W. 2d 150 (1978). “The granting of a default judgment is a harsh and drastic action and may deprive a party of substantial rights.” Winters v. Lewis, supra.

Appellee’s suit was filed by an attorney, who had previously represented appellant on an unrelated matter in which he had been given power of attorney for appellant during a period of time from 1976 to 1977. There was some evidence he had also represented him in the spring of 1978, 7 months prior to the filing of this action, on a DWI charge. When appellant received the summons on November 13, 1978, he telephoned his former attorney, who informed him that he was representing the appellee in the matter, could not discuss the suit with him, and advised appellant to get an attorney to represent him. When appellant said he had insurance coverage, the attorney explained the carrier’s duty to defend him and advised appellant to contact the carrier. According to appellant, the attorney did not advise him to hire a lawyer but told him he wanted the name of the insurance company because he wanted to collect from it. However, appellant admitted he knew by the end of this conversation that the attorney was representing the appellee and would not represent him. It is undisputed that appellant called back that same day and left the name of his insurance carrier with the attorney’s secretary. That day the attorney wrote the insurance carrier, sending a copy of the complaint. About a week later, or within the 20 days after service of process, the carrier advised him by telephone and letter that there was no insurance coverage on the vehicle. The attorney did not pass this information on to the appellant. Appellant testified that when he called back and gave the name and telephone number of the insurance company to the attorney’s secretary, appellant “thought that was the end of it.” After receiving notice of the default judgment, appellant then consulted his present attorney, who promptly filed the motion to quash service, as indicated, and later amended the pleading to vacate judgment.

When it is demonstrated there exists a just cause for a defendant not filing a timely answer, a default judgment should be set aside. Barkis v. Bell, 238 Ark. 683, 384 S.W. 2d 269 (1964). As a proper guide to the exercise of discretion, the basic underlying policy is to have each case determined on its merits because, in the normal course of litigation, substantial rights are preserved and justice between the parties is best served by this policy. In view of the former relationship between appellant and appellee’s attorney and appellant’s promptness in questioning the default judgment, we are of the view that there was an honest and unfortunate misunderstanding which constituted just cause for not filing a timely answer. Therefore, the default judgment is set aside and vacated.

Reversed and remanded.

Fogleman, C.J., and Hickman, J., dissent.

* This statute is now replaced by Ark. Rules of Civil Procedure, Rules 55 and 60 (Repl. 1979).