Peoples Bank, Natl. Assn. v. McGhee

[Cite as Peoples Bank, Natl. Assn. v. McGhee, 2013-Ohio-3859.]
IN THE COURT OF APPEALS OF OHIO
FOURTH APPELLATE DISTRICT
GALLIA COUNTY
Peoples Bank, National Association, : Case Nos. 12CA11
: 13CA4
Plaintiff-Appellee, :
: DECISION AND
v. : JUDGMENT ENTRY
:
Steve McGhee, Inc., et al., :
:
Defendants-Appellees, :
:
and :
:
Steve McGhee, Inc., et al., : RELEASED: 09/03/2013
:
Third-Party Plaintiffs-Appellees, :
:
v. :
:
Spring Valley Properties, Inc., et al., :
:
Third-Party Defendants-Appellants. :
______________________________________________________________________
APPEARANCES:
Rebecca D. Louks, OTHS HEISER & MILLER LLC, Wellston, Ohio, for appellants
Spring Valley Properties, Inc., Matthew Clickenger, and Heather Clickenger.
Eric. R. Mulford, MULFORD & WISEMAN, LLC, Gallipolis, Ohio, for appellees Steve
McGhee, Inc. and Steven B. McGhee.
Jerry E. Peer, Jr., PETERSON, CONNERS, FERGUS & PEER, LLP, Columbus, Ohio,
for Receiver, New Perspective Asset Management, LLC.
______________________________________________________________________
Harsha, J.
{¶1} Matthew Clickenger, Heather Clickenger, and Spring Valley Properties,
Inc. appeal the trial court’s denial of their Civ.R. 60(B) motion for relief from the default
judgment the court granted Steven B. McGhee and Steve McGhee, Inc. (collectively
“McGhee”). The Appellants claim the court abused its discretion when it denied their
Gallia App. Nos. 12CA11 & 13CA4 2
motion without an evidentiary hearing. We agree. The motion and attached evidentiary
materials contain sufficient allegations of operative facts to merit a hearing to determine
whether Civ.R. 60(B) relief is appropriate. Accordingly, we reverse the trial court’s
judgment and remand for a hearing. This decision renders moot the Appellants’
additional arguments about the merits of their Civ.R. 60(B) motion.
I. Facts
{¶2} Peoples Bank, National Association filed a foreclosure complaint against
McGhee and other defendants who are not pertinent to this appeal. In response,
McGhee filed an answer, counterclaim, cross claims, and a third-party complaint against
the Appellants. In the third-party complaint, McGhee made breach of contract and fraud
claims. McGhee also made allegations related to piercing the corporate veil and
claimed the Clickengers had personally guaranteed payment of sums due McGhee
under a land installment contract. Because the Appellants did not answer the third-
party complaint, McGhee filed a motion for default judgment against them. The trial
court granted this motion by entry filed on February 14, 2012. The court entered
judgment against the Appellants, jointly and severally, in the amount of $336,960.19
plus interest and court costs.
{¶3} On May 31, 2012, the Appellants filed a Civ.R. 60(B) motion for relief from
judgment and requested a hearing. The court denied the motion without a hearing in
December 2012, finding the Appellants “failed to satisfy the three-part test set forth in
GTE Automatic Electric, Inc. v. ARC Industries, Inc.” The Appellants appealed from this
entry in appellate case number 12CA11. Subsequently, the trial court issued a nunc pro
tunc entry, apparently at the Appellants’ request, certifying that there was “no just
Gallia App. Nos. 12CA11 & 13CA4 3
reason for delay” of an appeal from its entry denying the Civ.R. 60(B) motion. The
Appellants filed a notice of appeal from this entry in appellate case number 13CA4.
Upon their request, we consolidated the appeals.
II. Assignment of Error
{¶4} The Appellants assign one error for our review:
The trial court abused its discretion in overruling the Clickengers’ Civ.R.
60(B), Motion for Relief from Judgment.
III. Motion for Relief from Judgment
{¶5} In their sole assignment of error, the Appellants contend the trial court
abused its discretion when it overruled their Civ.R. 60(B) motion for relief from
judgment. Initially, we note that at the time the Appellants filed their motion, it did not
actually qualify as a Civ.R. 60(B) motion. Civ.R. 60(B) states that a court “may relieve a
party or his legal representative from a final judgment, order or proceeding * * *.”
(Emphasis added.) Thus, a Civ.R. 60(B) motion is “proper only with respect to final
judgments.” Fleenor v. Caudill, 4th Dist. Scioto No. 03CA2886, 2003-Ohio-6513, ¶ 12.
“If the judgment from which the moving party seeks relief is not final, then the motion is
properly construed as a motion to reconsider * * *.” Id. at ¶ 13.
{¶6} Here, the February 2012 default judgment entry did not constitute a final
order because at the time the court issued it, claims still pended against other parties
and the court did not certify that there was “no just reason for delay” under Civ.R. 54(B).
See Jarvis v. Staley, 4th Dist. Washington No. 10CA15, 2012-Ohio-3832, ¶ 9-10.
Nonetheless, it appears that by the time the trial court actually ruled on the Appellants’
motion, the court resolved the remaining claims and a final order did exist. Therefore,
like the parties and trial court, we will treat the Appellants’ motion as one for relief from
Gallia App. Nos. 12CA11 & 13CA4 4
judgment instead of as one for reconsideration.
{¶7} The Appellants argue in part that the court erred when it denied their
motion without first conducting an evidentiary hearing. “A party who files a motion for
relief from judgment under Civ.R. 60(B) is not automatically entitled to a hearing on the
motion.” Natl. City Home Loan Servs., Inc. v. Gillette, 4th Dist. Scioto No. 05CA3027,
2006-Ohio-2881, ¶ 15. “We review the trial court’s decision as to whether to conduct an
evidentiary hearing under an abuse of discretion standard.” Harris v. Harris, 5th Dist.
Stark No. 2000CA00196, 2001 WL 109128, *3 (Feb. 5, 2001). The phrase “abuse of
discretion” connotes an attitude on the part of the court that is unreasonable,
unconscionable, or arbitrary. State v. Adams, 62 Ohio St.2d 151, 157, 404 N.E.2d 144(1980). When applying the abuse of discretion standard, a reviewing court is not free to
merely substitute its judgment for that of the trial court. In re Jane Doe 1, 57 Ohio St.3d
135, 138, 566 N.E.2d 1181 (1991). However, even though the court’s discretion is
broad, it is not unbridled.
{¶8} The movant bears the burden to demonstrate that he is entitled to a
hearing on a Civ.R. 60(B) motion. PHH Mtge. Corp. v. Northrup, 4th Dist. Pickaway No.
11CA6, 2011-Ohio-6814, ¶ 28. “To warrant a hearing on a Civ.R. 60(B) motion, the
movant must allege operative facts that would warrant relief under Civ.R. 60(B).” Id.,citing Kay v. Marc Glassman, Inc., 76 Ohio St.3d 18, 19, 665 N.E.2d 1102 (1996).
“Although a movant is not required to submit evidentiary material in support of the
motion, a movant must do more than make bare allegations of entitlement to relief.”
PHH Mtge. Corp. at ¶ 28, citing French v. Taylor, 4th Dist. Lawrence No. 01CA15, 2002
WL 10544 (Jan. 2, 2002).
Gallia App. Nos. 12CA11 & 13CA4 5
{¶9} Ultimately, “[t]o prevail on a motion brought under Civ.R. 60(B), the
movant must demonstrate that: (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, and, where the grounds of relief are Civ.R. 60(B)(1), (2) or (3), not more than one
year after the judgment, order or proceeding was entered or taken.” GTE Automatic
Elec., Inc. v. ARC Industries, Inc., 47 Ohio St.2d 146, 351 N.E.2d 113 (1976),
paragraph two of the syllabus. “If any of these three requirements is not met, the
motion should be overruled.” Natl. City Home Loan Servs., Inc. at ¶ 14. See GTE
Automatic Elec., Inc. at 151 (finding these requirements “independent and in the
conju[n]ctive, not the disjunctive”).
{¶10} Timeliness. The Appellants relied in part on Civ.R. 60(B)(1) as grounds
for relief in their motion. To assert that provision, their motion had to be filed not more
than one year after the final judgment was entered and also within a “reasonable time.”
Civ.R. 60(B). “A reasonable time must be determined under the facts of each case.”
French at *2.
{¶11} In their motion, the Appellants attempted to explain the approximately
three and a half month delay between the time the court entered the default judgment
against them and the time they filed the Civ.R. 60(B) motion. The Appellants claimed
they spent the time looking for an attorney to represent them, but multiple attorneys
declined before they finally found one. But as we explained above, when the Appellants
filed their Civ.R. 60(B) motion, the default judgment against them did not actually
constitute a final order. However, it appears that judgment became final before the
Gallia App. Nos. 12CA11 & 13CA4 6
court ruled on the motion, so in effect, the Appellants prematurely filed their Civ.R. 60(B)
motion and there was no delay for them to explain. Thus, it would seem the Appellants
filed the motion within the one-year time limit and within a reasonable time despite the
fact that they did not make this specific argument in their motion.
{¶12} Meritorious Defense. “ ‘[A] proffered defense is meritorious if it is not a
sham and when, if true, it states a defense in part, or in whole, to the claims for relief set
forth in the complaint.’ ” (Emphasis added.) Spaulding-Buescher v. Skaggs Masonry,
Inc., 4th Dist. Hocking No. 08CA1, 2008-Ohio-6272, ¶ 10, quoting Amzee Corp. v.
Comerica Bank-Midwest, 10th Dist. Franklin No. 01AP-465, 2002-Ohio-3084, ¶ 20. In
the proposed answer attached to their motion, the Appellants alleged the defense of
failure to state a claim upon which relief can be granted. Although not stated in the
“Meritorious Defense” section of their motion, the Appellants complained in their
motion that the third-party complaint alleged fraud but “fails to allege any specific acts
which constitute fraud.” See Civ.R. 9(B) (“In all averments of fraud * * *, the
circumstances constituting fraud * * * shall be stated with particularity.”). A review of the
third-party complaint suggests this partial defense to the claims is not a sham.
Therefore, we conclude the Appellants alleged enough operative facts of a partial
meritorious defense to warrant a hearing.
{¶13} Excusable Neglect. In their motion, the Appellants argued in part that they
were entitled to relief from the default judgment under Civ.R. 60(B)(1) because of
excusable neglect. Excusable neglect is “an elusive concept which has been difficult to
define and to apply.” Kay, 76 Ohio St.3d at 20, 665 N.E.2d 1102. However, “the
inaction of a defendant is not ‘excusable neglect’ if it can be labeled as a ‘complete
Gallia App. Nos. 12CA11 & 13CA4 7
disregard for the judicial system.’ ” Id., quoting GTE Automatic Elec., Inc., 47 Ohio St.2d
at 153, 351 N.E.2d 113. Moreover, “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 11 Wright & Miller, Federal Practice & Procedure, Section
2851, 140.
{¶14} An excusable neglect inquiry “must of necessity take into consideration all
the surrounding facts and circumstances.” Colley at 249. “These include the amount of
time between the last day that an answer would have timely been filed and the date the
default judgment was granted, the amount of the judgment awarded, and ‘the
experience and understanding of the defendant with respect to litigation matters.’ ”
State v. Hulgin, 9th Dist. Summit No. 26719, 2013-Ohio-2794, ¶ 13, quoting Colley at
249. In addition, courts must remain mindful of the fact that “‘[m]atters involving large
sums should not be determined by default judgments if it can reasonabl[y] be avoided.’”
Colley at 249, fn.5, quoting Tozer v. Charles A. Krause Milling Co., 189 F.2d 242, 245
(3d Cir.1951). Moreover, “[w]here timely relief is sought from a default judgment and
the movant has a meritorious defense, doubt, if any, should be resolved in favor of the
motion to set aside the judgment so that cases may be decided on their merits.” GTE
Automatic Elec., Inc. at paragraph three of the syllabus.
{¶15} In their motion, the Appellants complained that the third-party complaint
was “extraordinarily lengthy and complicated, involving multiple parties, counter-claims,
Gallia App. Nos. 12CA11 & 13CA4 8
cross-claims, and third parties.” The Appellants averred that they are inexperienced in
legal matters and that when they received notice of the third-party complaint, they
“misunderstood the document to mean that action was not required” from them “until the
case between People’s Bank and Steve McGhee was resolved.”
{¶16} As the Appellees point out, this court has previously stated that
“[g]enerally, a failure to plead or respond after admittedly receiving a copy of a
complaint is not ‘excusable neglect.’ ” Shannon v. Shannon, 4th Dist. Lawrence No.
00CA46, 2001 WL1155711, *2 (Sept. 26, 2001). We have also previously recognized
that “[s]everal cases address the concept of ‘excusable neglect’ as it relates to pro se
litigants. The vast majority conclude that lack of counsel and ignorance of the legal
system does not constitute ‘excusable neglect.’ ” Dayton Power & Light v. Holdren, 4th
Dist. Highland No. 07CA21, 2008-Ohio-5121, ¶ 12.
{¶17} Nonetheless, the experience and understanding of the defendant about
litigation is a factor courts can consider in evaluating excusable neglect. The Appellants
made averments about their lack of experience. Moreover, this litigation involves a
large sum of money – over $300,000.00. We believe these “facts and circumstances,”
coupled with the Appellants’ timeliness and alleged partial meritorious defense,
provided the court with enough operative facts to warrant a hearing on the Civ.R. 60(B)
motion. Therefore, we conclude the court’s decision to deny the motion without a
hearing was unreasonable.
{¶18} Accordingly, we sustain the sole assignment of error in part, reverse the
court’s judgment, and remand for an evidentiary hearing on the Civ.R. 60(B) motion.
We stress the fact that our decision should not be construed as a comment on the
Gallia App. Nos. 12CA11 & 13CA4 9
ultimate merits of the Civ.R. 60(B) motion. In fact, our decision to remand for an
evidentiary hearing renders moot the Appellants’ claims about the merits of their motion,
so we do not address them. App.R. 12(A)(1)(c). On remand, the trial court still has
discretion to grant or deny the motion. ATI Performance Prods., Inc. v. Stevens, 4th
Dist. Hocking No. 12CA6, 2013-Ohio-1313, ¶ 6 (“A Civ.R. 60(B) motion for relief from
judgment is generally committed to the trial court’s sound discretion * * *.”). However, it
would be helpful for potential future appellate review if the trial court issued a decision to
explain the rationale behind whatever decision it makes.
JUDGMENT REVERSED AND
CAUSE REMANDED.
Gallia App. Nos. 12CA11 & 13CA4 10
JUDGMENT ENTRY
It is ordered that the JUDGMENT IS REVERSED and that the CAUSE IS
REMANDED. Appellees shall pay the costs.
The Court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate issue out of this Court directing the Gallia
County Court of Common Pleas to carry this judgment into execution.
Any stay previously granted by this Court is hereby terminated as of the date of
this entry.
A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of
the Rules of Appellate Procedure.
McFarland, P.J. & Abele, J.: Concur in Judgment and Opinion.
For the Court
BY: ____________________________
William H. Harsha, Judge
NOTICE TO COUNSEL
Pursuant to Local Rule No. 14, this document constitutes a final judgment
entry and the time period for further appeal commences from the date of filing
with the clerk.