Kristina Abolins v. Frank Santas ( 2017 )

10/03/2017
IN THE COURT OF APPEALS OF TENNESSEE
AT NASHVILLE
August 24, 2017 Session
KRISTINA ABOLINS, ET AL. v. FRANK SANTAS, ET AL.
Appeal from the Chancery Court for Davidson County
No. 15-1315-II William E. Young, Chancellor
No. M2017-00357-COA-R3-CV
This appeal concerns an order to set aside a default judgment. Kristina Abolins and
Christopher Heath Hawkins (“Plaintiffs”) sued Frank Santas (“Santas”), doing business
as Gunner Inc., and Alta Horizon, Inc. (“Defendants,” collectively), asserting a number of
causes of action arising out of Defendants’ work on a renovation project at Plaintiffs’
home. After several months with no responsive filing from Defendants, Plaintiffs moved
for default judgment. The Chancery Court for Davidson County (“the Trial Court”)
granted Plaintiffs’ motion for default judgment. Defendants filed a motion to set aside
default judgment, raising certain defenses and taking issue with service of process. The
Trial Court entered an order granting the motion to set aside on the condition that
Defendants pay Plaintiffs’ attorney’s fees and expenses. Defendants did not pay, and
instead appealed to this Court. We find no abuse of discretion by the Trial Court. We,
therefore, affirm the judgment of the Trial Court.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed;
Case Remanded
D. MICHAEL SWINEY, C.J., delivered the opinion of the court, in which THOMAS R.
FRIERSON, II, J., joined, and W. NEAL MCBRAYER, J., filed a separate concurring and
dissenting opinion.
Charles J. Friddell, Nashville, Tennessee, for the appellants, Frank Santas and Alta
Horizon, Inc.
Jennifer S. Ghanem, Nashville, Tennessee, for the appellees, Kristina Abolins and
Christopher Heath Hawkins.
OPINION
Background
In November 2015, Plaintiffs sued Defendants in the Trial Court seeking damages
arising from an alleged breach of contract, conversion, violation of the Tennessee
Consumer Protection Act (“TCPA”), and other causes of action. Plaintiffs alleged they
had hired Defendants to perform a home renovation project which, according to
Plaintiffs, never was completed satisfactorily by Defendants.
Plaintiffs attempted to serve Santas individually and as managing agent of Alta
Horizon by means of the Dickson County Sheriff’s Office. Process was returned with the
notation “avoiding service” entered. Plaintiffs then hired private process servers to serve
Defendants. According to affidavits by process servers Harold Loux and Kevin Trick,
Defendants were served on February 23, 2016. The summons return was late-filed in
December 2016.
On March 31, 2016, Plaintiffs’ counsel, Jennifer Ghanem (“Ghanem”), spoke with
Defendants’ counsel, Charles Friddell (“Friddell”), concerning the case. Ghanem
emailed Friddell a copy of Plaintiffs’ complaint. On April 1, 2016, Friddell sent a letter
to Ghanem in which he stated that he was not authorized to accept service on behalf of
Defendants. On April 19, 2016, Friddell informed Ghanem by email that he would file a
motion to dismiss. However, no motion to dismiss was filed at this stage. Friddell did
not file an appearance on behalf of Defendants until the filing of Defendants’ motion to
set aside default judgment.
On May 31, 2016, Plaintiffs filed a motion for default judgment. By July 2016
order, the Trial Court granted default judgment in favor of Plaintiffs for a total of
$166,840.98, which included a trebling under the TCPA of $55,613.66 in compensatory
damages. The Trial Court stated in this order regarding the service of process that:
“Defendants did not respond to process or participate in the litigation, and a Motion for
Entry of Default was filed by the Plaintiffs, to which no response was filed as required by
Rule 55.01 of the Tenn. R. Civ. Pro.”
In October 2016, Defendants filed their motion to set aside default judgment
pursuant to Tenn. R. Civ. P. 55.02 and 60.02. Defendants also filed a motion to dismiss.
In their memorandum in support of their motion to set aside default judgment,
Defendants asserted the following with respect to what they alleged was lack of notice
and improper service of process:
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The Defendants Motion under Rule 60.02 (1) for mistake,
inadvertence, surprise or excusable neglect would show unto the Court the
Sworn Affidavit of Frank Santas, the Declaration of Counsel, Charles J.
Friddell and the record as reflected in the case file.
The Affidavit of Frank Santas clearly shows that he was served with
two papers on February 9th, 2016 which are the two Summons as prepared
and issued by this Court. However, the Affidavit clearly states that no
Complaint was attached to either of the Summons as required by the law to
effectively serve a Defendant in this cause. The Affidavit further shows
that he brought the two Summons to Charles J. Friddell who he directed to
write a letter informing the Plaintiffs counsel that the Service of Process
was improperly handled. The Declaration of Counsel as submitted by
Charles J. Friddell clearly shows that a letter was directed to Plaintiffs
counsel outlining the objection to the Service of Process by the private
process service.
Further, the Statement of Counsel clearly show e-mail
correspondence with Plaintiff’s counsel outlining the irregularities and the
fact that Gunner, Inc. while previously Administratively Dissolved in
August of 2015 was reinstated on January 26, 2016 and that Charles J.
Friddell and agreed to accept Service of Process for Gunner, Inc. from
Plaintiff’s counsel. Curiously, there is nothing in the Court record with
respect to any representation or notices of the Motion for Default, the
Notice of Default Hearing, or the Order as granted in this case.
Further, the Declaration of Counsel as submitted by Charles J.
Friddell shows that he has received no correspondence other than the letter
and e-mails Ms. Ghanem, Plaintiff’s counsel [sic]. Neither the Motion nor
the Notice of Hearing nor the proposed Final Order was submitted to or
sent as a courtesy to Charles J. Friddell, Attorney.
The Affidavit of Frank Santas also states that due to his turning the
Summons over to Mr. Friddell, his attorney, that he felt this matter was
being handled by Mr. Friddell and did not receive the correspondence or
mail sent from the Plaintiff’s counsel’s office.
On October 21st, 2016 Frank Santas received from the Chancery
Court Clerk and Master’s Office a Bill of Cost and immediately called
Charles Friddell to find out what the status of this case was. On October
23rd, 2016 Charles J. Friddell obtained copies of the Pleadings filed in this
case after April, 2016 and was advised for the first time that a Judgment,
including damages assessed of $55,613.66 had since been entered along
with a Judgment for treble damages of $166,840.98.
***
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Defendants further would show to the Court, pursuant to Rule
60.02(3) that the entry of a Judgment is void as contrary to the laws of the
State of Tennessee. Plaintiffs did not properly serve the Defendants as
required by Rule 4.04(1) and Rule 4.04(4) of the Tennessee Rules of Civil
Procedure. Plaintiffs did not serve a copy of the Complaint along with the
two summons.
The Trial Court conducted a hearing on the two motions in November 2016. The
Trial Court ruled that it would grant Defendants’ motion to set aside default judgment on
the condition that Defendants pay Plaintiffs’ attorney’s fees and costs. Defendants filed a
motion to alter or amend judgment, in which they articulated their position in part as
follows:
Defendants have incurred substantial attorney fees and costs in their
Motion to Set Aside, appearance and review of other matters. Defendants
have shown the Court by other averments that substantially the amount of
fees and delays in this matter could have been minimized had Plaintiffs
counsel followed the rules and given notice to Mr. Friddell that she was
filing for a Default Judgment in this matter. Defendants maintain that the
imposition of fees as a sanction in this regard is inequitable.
***
The Defendants have by sworn affidavit stated that they did not receive the
Motion for Default Judgment nor the Order of Default. Plaintiffs’ counsel
relies on the Certificate of Service contained in those documents as filed.
The Certificate of Service by Jennifer S. Ghanem to Alta Horizon,
Inc. was improperly addressed. The zip code for Bon Aqua, Tennessee is
37025. The Plaintiffs counsel mailed the letter for Alta Horizon, Inc. to
37205 which is the zip code for Belle Meade. This clearly rebuts the
presumption that the Certificate of Service to Alta Horizon, Inc. is
presumed to be served. It further may explain why the Defendants did not
receive such notice.
The certificate of service required by Tenn. R. Civ. P. 5.03 is prima
facia evidence that the document was served in the manner described in the
certificate and raises a rebuttable presumption that it was received by the
person to whom it was sent. The defendants contend that the failure of
Plaintiffs counsel to properly and timely file documents with the Court
impeaches the certificates as signed and rebuts the presumption. The
defendants further contend that the failure of Plaintiffs’ counsel to properly
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address the certificates to Alta Horizon, Inc., as signed rebuts the
presumption.
In two separate January 2017 orders, the Trial Court denied Defendants’ motion to
dismiss and granted Defendants’ motion to set aside default subject to condition. In its
order denying Defendants’ motion to dismiss, the Trial Court stated as follows:
This matter came on for hearing on the 18th day of November, 2016
upon the Defendants’, Frank Santas d/b/a Gunner, Inc. and Alta Horizon,
Inc. (“Defendants”), motion to dismiss. The Defendants contend that this
Court lacks jurisdiction over Defendant Santas, that the Plaintiffs did not
obtain proper service upon either Defendant Santas d/b/a Gunner, Inc. or
Defendant Alta Horizon, Inc., and that the Complaint fails to state a claim
against Defendant Alta Horizon, Inc. Upon consideration of the motion,
the response, the pleadings of the parties, the argument of counsel and the
entire record, this Court denies the motion to dismiss. This Order
incorporates and reiterates the ruling made in open court at the November
18th hearing.
First, the Defendants claim that they were not properly served in
compliance with Tenn. R. Civ. P. 401(1) and 401(4). The Plaintiffs,
however, contend that the Defendants were properly served in strict
compliance with those rules. Tenn. R. Civ. P. 401(1) states that service
shall be made upon an individual “by delivering a copy of the summons
and of the complaint to the individual personally,” and Tenn. R. Civ. P.
401(4) provides that service shall be made upon a domestic corporation by
“delivering a copy of the summons and complaint to an officer or managing
agent thereof.” The Plaintiffs assert that they retained the services of Loux
Investigations, Inc. to serve a complaint and summons on Frank G. Santas
both in his personal capacity and in his capacity as the registered agent for
Gunner, Inc. and Alta Horizon, Inc. The Plaintiffs have filed with the
Court the affidavits of Harold G. Loux, the president of Loux
Investigations, Inc., and Kevin Trick, who both attested to serving the
complaints and summons on Mr. Santas on February 23, 2016. The Court
finds this information sufficient to confirm that service was appropriately
obtained upon the Defendants and therefore the motion to dismiss for
failure to obtain service should be denied.
Next, the Defendants contend that the Plaintiffs failed to state a
claim in regard to Defendant Alta Horizon, Inc. It is axiomatic that a
motion to dismiss under 12.02(6) challenges the legal sufficiency of the
complaint, not the strength of the plaintiff’s proof. Trau-Med of Am., Inc. v.
Allstate Ins. Co., 71 S.W.3d 691, 696 (Tenn. 2002). The Court must
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construe the complaint liberally, presuming all factual allegations to be true
and giving the plaintiff the benefit of all reasonable inferences. Cullum v.
McCool, 432 S.W.3d 829, 832 (Tenn. 2013). It is well-settled that a
complaint should not be dismissed for failure to state a claim unless it
appears that the plaintiff can prove no set of facts in support of his or her
claim that would warrant relief. Webb v. Nashville Area Habitat for
Humanity, Inc., 346 S.W.3d 422, 426 (Tenn. 2011). Great specificity in the
pleadings is ordinarily not required to survive a motion to dismiss; it is
enough that the complaint set forth “a short and plain statement of the claim
showing that the pleader is entitled to relief.” Trau-Med of Am., Inc., 71
S.W.3d at 696. Under this lenient standard, the Court finds that the
allegations in the Complaint against Defendant Alta Horizon, Inc. are
sufficient to withstand a motion to dismiss. The Complaint basically
alleges Defendants were engaged to complete a home renovation project for
the Plaintiffs and failed to complete the project, resulting in the causes of
action set forth in the Complaint. These allegations raise factual issues that
are inappropriate for resolution on a motion to dismiss.
Accordingly, and for the above-stated reasons, the Defendants’
motion to dismiss is hereby denied.
Defendants raise no issue on appeal as to the Trial Court’s denial of their motion to
dismiss.
In its order granting Defendants’ motion to set aside the default judgment, the
Trial Court stated as follows:
This matter was heard on November 18, 2016 on the Defendants’
motion to set aside the default judgment entered by this Court on July 7,
2016. Upon consideration of the pleadings of the parties, the argument of
counsel and the entire record, this Court finds that the Order of default
judgment shall be set aside provided the Defendants pay the attorneys’ fees
and expenses incurred by the Plaintiffs, Kristina Abolins and Heath
Hawkins (“Plaintiffs”), in filing the motion for default judgment, pursuing
collection of that judgment and responding to the motion to set aside the
default judgment. This Order incorporates and reiterates the findings of
fact and conclusions of law stated by this Court following the hearing of
this matter.
Plaintiffs’ counsel has submitted a detailed statement that the above-
cited fees and expenses total $9,935.93. The Court finds this amount
reasonable and related to matters involving the default judgment. These
fees and expenses shall be paid within thirty (30) days of entry of this
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Order. Once these fees and expenses are paid, the Plaintiffs shall file with
this Court written notice of the payment and such notice will trigger the
setting aside of the default judgment per this Order. If these fees and
expenses are not paid by the date required by this Order, then the Plaintiffs
will file written notice of non-payment with this Court and the default
judgment will remain in effect.
BACKGROUND
The Plaintiffs filed the Complaint in this case on November 2, 2015,
seeking a judgment for damages against the Defendants for breach of
contract, breach of implied warranty, negligence, fraud, conversion and
violation of the Tennessee Consumer Protection Act codified at Term.
Code Ann. §§ 47-18-101 to -131. These claims arose out of the
engagement by the Plaintiffs of the “Defendant Santas, doing business as
Gunner, Inc. and Alta Horizon, Inc. to complete a home renovation project
on the property located at . . . .” Complaint, ¶ 8.
The Plaintiffs initially sought to serve process under Tenn. R. Civ.
Proc. 4.04 on the Defendant Frank Santas, on his own behalf and as the
officer or managing agent of the Defendant Alta Horizon, thru the Dickson
County Sheriff’s Office. The process was returned to this Court as not
served, with a notation that the Defendants were not found and were
“avoiding service.” The Plaintiffs then retained Loux Investigations, Inc. to
obtain service on the Defendants. Per the affidavits of private process
servers Harold Loux and Kevin Trick, filed as Exhibit C with the Plaintiffs’
response to the Defendants’ motion, the Defendants were served on
February 23, 2016. For some reason, the summons evidencing such service
was not initially returned to this Court. On December 1, 2016, the
summons evidencing service was late filed with the Court.
The Plaintiffs state in their response that Plaintiffs’ counsel, Ms.
Ghanem, initially discussed this case by telephone with Defendants’ current
counsel, Mr. Friddell, on March 31, 2016. By letter dated April 1, 2016
attached as Exhibit D to the Plaintiffs’ response, Mr. Friddell disputed that
service on his clients had been properly obtained and also stated that he was
not authorized to accept service on behalf of his clients. Ms. Ghanem
advised Mr. Friddell that service was properly obtained, and she
subsequently emailed a copy of the Complaint to Mr. Friddell. Per an
email attached as Exhibit D to the Plaintiffs’ response, Mr. Friddell advised
Ms. Ghanem on April 19, 2016 that he would file a motion to dismiss the
Plaintiffs’ Complaint.
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After the passage of about 40 days with no responsive filing by the
Defendants, on May 31, 2016 the Plaintiffs filed a motion for default
judgment with the Court. The certificate of service states that the
Defendants were mailed a copy of the motion. Mr. Friddell was not served
with the motion, apparently because he had not filed an appearance on
behalf of the Defendants in this case. No one appeared for the Defendants
at the June 24, 2016 hearing on the default judgment motion. The Court
entered an Order on July 7, 2016 granting default judgment in favor of the
Plaintiffs for $55,613.66 for compensatory damages, in addition to treble
damages, for a total judgment of $166,840.98. The Order noted that
“Defendants did not respond to process or participate in the litigation.”
Approximately four months later, on October 28, 2016, Mr. Friddell,
on behalf of the Defendants, filed a motion to set aside this default
judgment pursuant to Tenn. R. Civ. Proc. 55.02 and 60.02. This motion
included the Declaration of Mr. Friddell and the Affidavit of Mr. Santas.
Mr. Santas disputed the allegations in the Complaint, specifically stating no
written contract for renovations on the Plaintiffs’ house had been entered
between the Defendants and Plaintiffs and that Mr. Santas was just
performing “pro bono” work in assisting the Plaintiffs with these
renovations. Mr. Santas further stated that, if any contract did exist, it
would be between the Plaintiffs and “Gunner, Inc.”, a Tennessee
corporation that, as of August 2015 when this Complaint was filed, was not
active and had been administratively dissolved.1 The Defendants also
contest that they were properly served under Tenn. R. Civ. Proc. 4.04.
ANALYSIS
Rule 60.02 motions should be viewed liberally when the movant
seeks relief from a default judgment. Pryor v. Rivergate Meadows
Apartment Associates Ltd. P’ship, 338 S.W.3d 882, 885 (Tenn. Ct. App.
2009) (citing Tenn. Dep’t of Human Servs. v. Barbee, 689 S.W.2d 863, 866
(Tenn.1985)). A request to vacate a default judgment in accordance with
Rule 60.02 should be granted if there is reasonable doubt as to the justness
of dismissing the case before it can be heard on the merits. Id. (citing Tenn.
State Bank v. Lay, 609 S.W.2d 525, 527 (Tenn. Ct. App. 1980)). Tennessee
courts have recognized that “default judgments run counter to the judicial
system’s general objective of disposing of cases on the merits.” Henry v.
Goins, 104 S.W.3d 475, 481 (Tenn. 2003). When a party seeks Rule 60
relief from a default judgment based on mistake, inadvertence, surprise, or
1
Mr. Santas stated that Gunner, Inc. was reinstated on January 26, 2016.
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excusable neglect, the Court considers the following factors: 1) whether the
default was willful, 2) whether the defendant has a meritorious defense, and
3) whether the non-defaulting party would be prejudiced if relief were
granted. Id.
In this case, the Court finds that the aforementioned three factors,
coupled with the preference in Tennessee law of trying a case on the merits
rather than entering a judgment by default, militate in favor of setting aside
the prior order granting a default judgment. Having so determined, the
Court does find the default “willful” in this case. Both the Defendants and
Defendants’ counsel were aware of the Complaint - indeed the Complaint
was emailed to the Defendants’ counsel more than 40 days before the
motion for default judgment was filed. Despite knowledge of the existence
of the Complaint, the Defendants took no action to respond or to make an
appearance in this case. The Defendants contended service of process was
not properly made, but failed to file a motion to dismiss or other responsive
motion asserting insufficiency of service of process. The Defendants failed
to respond to the motion for default judgment once filed. Despite this
inaction by the Defendants, the Court finds that the Defendants, per the
affidavit of the Defendant Santas, have raised possible meritorious
defenses, including their denial that the Defendants had any written or oral
agreement with the Plaintiffs to perform the renovations in question.
Further, there is no evidence that the delay caused by the filing and granting
of the default judgment will adversely impact the Plaintiffs’ ability to try
this matter. As Tennessee courts have recognized, the mere passage of time
or simply proceeding to trial does not constitute prejudice sufficient to
avoid a trial on the merits. Patterson v. Sun Trust Bank, 328 S.W.3d 505,
512-13 (Tenn. Ct. App. 2010).
Nonetheless, despite finding the default judgment should be set
aside, the Court is concerned that the Plaintiffs have suffered needless cost
and expense occasioned by the Defendants’ failure to promptly address this
Complaint once they were advised of its existence. The Defendants, rather
than taking action to address this litigation, chose to ignore it. They took
no action after being served with process on February 23, 2016. They
failed to take any action in April of 2016 after Plaintiffs forwarded the
Complaint to Defendants’ counsel, which prompted the Plaintiffs to file a
motion for default judgment 40 days later. Then, once a default judgment
was entered, the Defendants did not seek to set aside that judgment until
four months had passed. Tenn. Rule Civ. Proc. 62.02 provides that a trial
court may set aside a prior judgment “upon such terms as are just.”
Tennessee courts have specifically found that this authority includes
permitting a trial court the discretion to condition relief from a default
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judgment on the defaulting party’s payment of attorneys’ fees and expenses
incurred by the non-defaulting party when the default was occasioned by
the action, or in this case the inaction, of the defaulting party. Morrow v.
Butcher, C.A. No. 702, 1987 WL 15523, at *3 (Tenn. Ct. App. Aug. 13,
1987) (affirming trial court’s conditioning of set aside of default judgment
upon payment of attorney’s fees and costs by defaulting party to non-
defaulting party where the fees ordered to be paid were “occasioned by the
default judgment proceedings” caused by the defaulting party); see also
Qualls v. Qualls, 589 S.W.2d 906, 910-11 (Tenn. 1979). Therefore, in
order to set aside this default judgment, justice requires the Defendants to
first compensate the Plaintiffs for the attorneys’ fees and expenses they
have incurred in obtaining the default judgment, seeking to execute on that
judgment and then having to defend against setting that motion aside.
Based upon the Court’s above finding, which was announced at the
conclusion of the hearing of this matter, the Court requested that the
Plaintiffs’ counsel file with the Court her affidavit documenting the
reasonable attorneys’ fees and expenses incurred by the Plaintiffs in
connection with the default judgment at issue. In her subsequently filed
affidavit, Plaintiff’s counsel detailed fees and expenses totaling $9,935.93
that were incurred as a result of the default judgment proceedings. The
Court has carefully reviewed this affidavit and finds these fees and
expenses reasonable.
On December 5, 2016, prior to the entry of this Memorandum and
Order, the Defendants, Frank Santas d/b/a Gunner, Inc. and Alta Horizon,
Inc. (“Defendants”), filed a “Motion for an Order to Alter or Amend
Judgment” in response to this Court’s oral findings at the November 18,
2016 hearing of this matter. The Court has reviewed the motion and, for
the reasons set forth in this Memorandum and Order, declines to alter or
amend its findings.2
CONCLUSION
Accordingly, the July 7, 2016 Order granting default judgment
against the Defendants shall be set aside provided the Defendants pay the
2
Among other arguments, the Defendants assert that their actions in failing to respond to the Plaintiffs"
various pleadings must be “willful” in order to warrant an award of attorney’s fees to Plaintiffs. While
the Court does find the Defendants’ actions were “willful”, a “willful” action is not necessary to sustain
an award of fees and expenses. Instead, the appropriate standard, as referenced in the above-cited Morrow
and Qualls cases, is for the trial court, in the exercise of its discretion, to draft a remedy that is “just.”
This may include compensation to a party harmed by the action or inaction of another party who fails to
respond to pleadings, leading to the entry of a default judgment.
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$9,935.93 in attorneys’ fees and expenses incurred by the Plaintiffs in filing
the motion for default judgment, pursuing collection of that judgment and
responding to the motion to set aside the default judgment. These fees and
expenses shall be paid within thirty (30) days of entry of this Order. Once
these fees and expenses are paid, the Plaintiffs shall file with this Court
written notice of the payment and such notice will trigger the setting aside
of the default judgment per this Order.
Should Defendants or their legal counsel fail to meet the conditions
set forth hereinabove, and upon written notice to this effect given to the
Court by the Plaintiffs’ counsel, this Order of Conditional Relief shall be
vacated, and the motion to set aside the default judgment shall be denied for
want of compliance.
Finally, the December 5, 2016 Motion to Alter or Amend Judgment
is denied.
(Footnotes in original).
Defendants filed a notice of appeal. After 30 days elapsed, Plaintiffs filed a notice
with the Trial Court informing of Defendants’ failure to pay attorney’s fees and expenses.
In March 2017, the Trial Court entered an order denying Defendants’ motion to set aside
default judgment for want of compliance:
This matter came on for hearing on the 18th day of November, 2016
at 9:00 a.m., upon the Motion to Set Aside the Default Judgment filed by
Defendants’ Frank Santas d/b/a Gunner, Inc. and Alta Horizon, Inc.
(“Defendants”). On January 10, 2017, the Court entered an Order setting
aside the Default Judgment, provided that Defendants pay the $9,935.93 in
attorney’s fees and expenses incurred by Plaintiffs within thirty (30) days
of the Court’s entry of its Order. The Court further stated that if
Defendants or their legal counsel fail to meet the stated conditions above,
the Order of Conditional Relief shall be vacated and the Motion to Set
Aside the Default Judgment shall be denied for want of compliance, upon
written notice to the Court by Plaintiffs’ counsel.
As of February 24, 2017, more than thirty (30) days after the Court’s
Order, Defendants and their legal counsel have failed to pay the $9,935.93
in attorney’s fees and expenses incurred by the Plaintiffs as set forth in the
Court's Order on January 10, 2017. Therefore, Defendants’ Motion to Set
Aside the Default Judgment shall be denied for want of compliance.
Following the Trial Court’s March 2017 order, Defendants filed an amended notice of
appeal to this Court.
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Discussion
Although not stated exactly as such, the sole issue Defendants raise on appeal is
the following: whether the Trial Court abused its discretion in imposing as a condition to
granting Defendants’ motion to set aside default judgment the payment of attorney’s fees
and expenses to Plaintiffs in the amount of $9,935.93.
As pertinent, Tenn. R. Civ. P. 55.02 provides that “[f]or good cause shown the
court may set aside a judgment by default in accordance with Rule 60.02.” Tenn. R. Civ.
P. 55.02. We review a trial court’s decision with regard to Tenn. R. Civ. P. 60.02
motions for abuse of discretion. Ferguson v. Brown, 291 S.W.3d 381, 386 (Tenn. Ct.
App. 2008).
In pertinent part, Tenn. R. Civ. P. 60.02 provides:
60.02. Mistakes—Inadvertence—Excusable Neglect—Fraud, etc.— On
motion and upon such terms as are just, the court may relieve a party or the
party’s legal representative from a final judgment, order or proceeding for
the following reasons: (1) mistake, inadvertence, surprise or excusable
neglect; . . .
Tenn. R. Civ. P. 60.02 (italics added).
The standard of review for the sole issue presented on this appeal is that of abuse
of discretion, a relatively deferential standard. Our Supreme Court has expounded upon
the abuse of discretion standard as follows:
The abuse of discretion standard of review envisions a less rigorous
review of the lower court’s decision and a decreased likelihood that the
decision will be reversed on appeal. Beard v. Bd. of Prof’l Responsibility,
288 S.W.3d 838, 860 (Tenn. 2009); State ex rel. Jones v. Looper, 86
S.W.3d 189, 193 (Tenn. Ct. App. 2000). It reflects an awareness that the
decision being reviewed involved a choice among several acceptable
alternatives. Overstreet v. Shoney’s, Inc., 4 S.W.3d 694, 708 (Tenn. Ct.
App. 1999). Thus, it does not permit reviewing courts to second-guess the
court below, White v. Vanderbilt Univ., 21 S.W.3d 215, 223 (Tenn. Ct.
App. 1999), or to substitute their discretion for the lower court’s, Henry v.
Goins, 104 S.W.3d 475, 479 (Tenn. 2003); Myint v. Allstate Ins. Co., 970
S.W.2d 920, 927 (Tenn. 1998). The abuse of discretion standard of review
does not, however, immunize a lower court’s decision from any meaningful
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appellate scrutiny. Boyd v. Comdata Network, Inc., 88 S.W.3d 203, 211
(Tenn. Ct. App. 2002).
Discretionary decisions must take the applicable law and the relevant
facts into account. Konvalinka v. Chattanooga-Hamilton County Hosp.
Auth., 249 S.W.3d 346, 358 (Tenn. 2008); Ballard v. Herzke, 924 S.W.2d
652, 661 (Tenn. 1996). An abuse of discretion occurs when a court strays
beyond the applicable legal standards or when it fails to properly consider
the factors customarily used to guide the particular discretionary decision.
State v. Lewis, 235 S.W.3d 136, 141 (Tenn. 2007). A court abuses its
discretion when it causes an injustice to the party challenging the decision
by (1) applying an incorrect legal standard, (2) reaching an illogical or
unreasonable decision, or (3) basing its decision on a clearly erroneous
assessment of the evidence. State v. Ostein, 293 S.W.3d 519, 526 (Tenn.
2009); Konvalinka v. Chattanooga-Hamilton County Hosp. Auth., 249
S.W.3d at 358; Doe 1 ex rel. Doe 1 v. Roman Catholic Diocese of
Nashville, 154 S.W.3d at 42.
To avoid result-oriented decisions or seemingly irreconcilable
precedents, reviewing courts should review a lower court’s discretionary
decision to determine (1) whether the factual basis for the decision is
properly supported by evidence in the record, (2) whether the lower court
properly identified and applied the most appropriate legal principles
applicable to the decision, and (3) whether the lower court’s decision was
within the range of acceptable alternative dispositions. Flautt & Mann v.
Council of Memphis, 285 S.W.3d 856, 872-73 (Tenn. Ct. App. 2008)
(quoting BIF, a Div. of Gen. Signal Controls, Inc. v. Service Constr. Co.,
No. 87-136-II, 1988 WL 72409, at *3 (Tenn. Ct. App. July 13, 1988) (No
Tenn. R. App. P. 11 application filed)). When called upon to review a
lower court’s discretionary decision, the reviewing court should review the
underlying factual findings using the preponderance of the evidence
standard contained in Tenn. R. App. P. 13(d) and should review the lower
court’s legal determinations de novo without any presumption of
correctness. Johnson v. Nissan N. Am., Inc., 146 S.W.3d 600, 604 (Tenn.
Ct. App. 2004); Boyd v. Comdata Network, Inc., 88 S.W.3d at 212.
Lee Medical, Inc. v. Beecher, 312 S.W.3d 515, 524-25 (Tenn. 2010).
Defendants argue in their brief on appeal that: “The failure to give Notice in
accordance with Davidson County Local Rule 5.04(14) in that an adverse action was
taken against a represented party and the failure to serve Notice as required by Tennessee
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Rules of Civil Procedure 5.02 to the Attorney representing the Defendants are material
factors that would have mitigated any damages . . . subsequently incurred.” Plaintiffs,
for their part, argue in their brief on appeal that: “[W]hile Defendants contended that
service was improper, the Chancery Court clearly stated that Defendants failed to file a
motion to dismiss or other responsive motions asserting insufficiency of service of
process.”
In Morrow v. Butcher, we affirmed the trial court in its determination that the
defendant had to pay the plaintiff’s attorney’s fees before the default judgment would be
set aside. We concluded as follows:
In this case, defendant clearly failed to comply with the established
rules of procedure, but nevertheless was granted relief. The condition of
the relief was that defendant should bear the burden of the expenses her
action had caused. From this record we can find nothing to indicate any
unfairness in such a ruling. The chancellor properly exercised his
discretion in refusing to set aside the default judgment unless defendant
paid the additional fees incurred by plaintiff.
Morrow v. Butcher, C.A. No. 702, 1987 WL 15523, at *3 (Tenn. Ct. App. Aug. 13,
1987), no appl. perm. appeal filed.
As shown in the “upon such terms as are just” language of Tenn. R. Civ. P. 60.02
and the precedent of Morrow, Tennessee courts may impose certain conditions before
setting aside default judgments. The only question raised in this appeal is whether the
Trial Court abused its discretion in conditioning the granting of Defendants’ motion to set
aside default judgment on their paying Plaintiffs’ attorney’s fees and expenses in the
amount of $9,935.93. The Trial Court specifically found:
[T]he Court does find the default “willful” in this case. Both the
Defendants and Defendants’ counsel were aware of the Complaint - indeed
the Complaint was emailed to the Defendants’ counsel more than 40 days
before the motion for default judgment was filed. Despite knowledge of
the existence of the Complaint, the Defendants took no action to respond or
to make an appearance in this case. The Defendants contended service of
process was not properly made, but failed to file a motion to dismiss or
other responsive motion asserting insufficiency of service of process. The
Defendants failed to respond to the motion for default judgment once filed.
We find no evidence in the record on appeal that would serve to overturn these factual
findings made by the Trial Court.
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Defendants state that “this matter could and would have been avoided if Plaintiffs’
counsel followed Rule 5.02 or had simply sent to Mr. Friddell a courtesy copy of the
Motion for Default, the Order Resetting the Hearing or even the final Default Judgment.”
The Trial Court found that “[t]he certificate of service [on the motion for default] states
that the Defendants were mailed a copy of the motion. Mr. Friddell was not served with
the motion, apparently because he had not filed an appearance on behalf of the
Defendants in this case.” First, while sending Friddell, who had told Ghanem he was not
authorized to accept service for Defendants, a courtesy copy of one or all of those
documents might represent good practice, Defendants cite to no rule mandating such
action. It is, after all, called a “courtesy copy.” Second, it is entirely speculative that
additional communication would have elicited a response from Defendants in light of the
Trial Court’s finding that Defendants’ failure to respond was willful. If Defendants now
wish to respond and defend against the lawsuit, it is reasonable to require them to pay for
the unnecessary expense Plaintiffs incurred in obtaining a default judgment only to have
it overturned should Defendants comply with the Trial Court’s reasonable condition.
We have carefully reviewed Plaintiffs’ fee statement contained in the record. We
find, as did the Trial Court, that these fees and expenses are reasonable and related to
Plaintiffs’ work in obtaining and later defending the default judgment. We find no abuse
of discretion in the Trial Court’s conditioning the grant of Defendants’ motion to set
aside the default judgment on their paying Plaintiffs’ $9,935.93 in attorney’s fees and
expenses incurred relative to the default judgment. We, therefore, affirm the judgment of
the Trial Court.
Although the Trial Court already has entered an order denying Defendants’ motion
to set aside the default judgment for want of compliance, we hold that, as Defendants
timely appealed, Defendants have 30 days from the entry of this Opinion and our
Judgment in which to pay, if they choose, $9,935.93 and thus satisfy the Trial Court’s
condition to set aside the default judgment.
Conclusion
The judgment of the Trial Court is affirmed, and this cause is remanded to the
Trial Court for further proceedings consistent with this Opinion and for collection of the
costs below. The costs on appeal are assessed against the Appellants, Frank Santas and
Alta Horizon, Inc., and their surety, if any.
____________________________________
D. MICHAEL SWINEY, CHIEF JUDGE
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