Harris Building Group, Inc. v. Tennessee Electrical, Inc.

06/10/2019
IN THE COURT OF APPEALS OF TENNESSEE
AT NASHVILLE
February 19, 2019 Session
HARRIS BUILDING GROUP, INC. v. TENNESSEE ELECTRICAL, INC.
Appeal from the Chancery Court for Davidson County
No. 17-471-I Claudia Bonnyman, Chancellor
___________________________________
No. M2018-00499-COA-R3-CV
___________________________________
When the defendant failed to answer a petition for declaratory judgment, the plaintiff
sought and obtained a default judgment. The defendant moved to set aside the default
judgment, arguing that it never received the motion for default judgment nor notice of the
hearing date on the motion. The trial court denied the defendant the requested relief,
finding that the defendant’s failure to answer the petition until months after entry of the
default judgment was willful. Discerning no abuse of discretion, we affirm.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed
W. NEAL MCBRAYER, J., delivered the opinion of the court, in which FRANK G.
CLEMENT, JR., P.J., M.S., and THOMAS R. FRIERSON II, J., joined.
Casey A. Long, Franklin, Tennessee, for the appellant, Tennessee Electrical, Inc.
William B. Hawkins III and Eric G. Evans, Nashville, Tennessee, for the appellee, Harris
Building Group, Inc.
OPINION
I.
On May 12, 2017, in the Chancery Court for Davidson County, Tennessee, Harris
Building Group, Inc. (“HBG”) filed a petition for declaratory judgment against
Tennessee Electrical, Inc. The petition alleged that HBG subcontracted with Tennessee
Electrical to complete electrical work on a construction project for a total price of
$98,600. According to HBG, Tennessee Electrical fell behind the agreed upon work
schedule, prompting HBG to tell Tennessee Electrical to “do what [it] need[ed] to do” in
order to catch up. Tennessee Electrical responded by having its employees work
overtime. Tennessee Electrical then invoiced HBG for the overtime costs. Among other
things, HBG sought a declaratory judgment that $98,600 was the extent of its liability and
that Tennessee Electrical bore the responsibility for any additional costs it incurred to
complete the work on schedule.
On July 5, 2017, HBG served the summons and petition for declaratory judgment
via electronic mail on Donald Gandee, the registered agent for Tennessee Electrical.
Counsel directed the email to Mr. Gandee’s counsel, who had agreed to accept service on
Mr. Gandee’s behalf. Later, HBG filed a “Proof of Service” attaching an email exchange
in which Mr. Gandee’s counsel confirmed that she was authorized by Mr. Gandee to
accept service. The email from Mr. Gandee’s counsel also disclosed that she would “not
be representing [Mr. Gandee] in Davidson County.”
On August 11, 2017, HBG moved for a default judgment. The motion certified
that a copy “ha[d] been served on this 11th day of August, 2017, upon [Tennessee
Electrical at its address listed with the Secretary of State and a secondary address known
to HBG as one belonging to Mr. Gandee] via USPS first class mail, postage prepaid, and
via USPS certified mail, return receipt requested.” The motion also included a notice of
hearing, which provided as follows:
This motion is set for hearing at 9:00 a.m. on August 25, 2017 in the
Davidson County Chancery Court, Part I, at 200 James Robertson Pkwy,
Nashville, Tennessee 37201. IF NO RESPONSE IS TIMELY FILED
AND PERSONALLY SERVED, THE MOTION SHALL BE GRANTED
AND COUNSEL OR PRO SE LITIGANT NEED NOT APPEAR IN
COURT AT THE TIME AND DATE SCHEDULED FOR THE
HEARING.
See Tenn. 20th J. Dist. R. § 26.04.
Despite the warning, Tennessee Electrical did not respond to the motion for
default judgment. And no one appeared on behalf of Tennessee Electrical at the
scheduled hearing. On August 31, 2017, the court entered an order granting HBG a
default judgment.
On September 29, 2017, Tennessee Electrical moved to set aside the default
judgment. Tennessee Electrical alleged “a mistake and/or misrepresentation by the
opposing party in that the opposing party submitted to the Court that it had sent notice of
the hearing date of August 25, 2017 to [Tennessee Electrical] when [HBG] had not done
so, or at the least that such notice did not reach [Tennessee Electrical].” Tennessee
Electrical also claimed that it “was unaware that a Motion for Default had been filed in
this matter.” Had the motion for default been noticed, Tennessee Electrical contended it
2
“would have defended this matter” because it could “provide proof that all required work
was performed and that [HBG] was in arrears as to its obligations to [Tennessee
Electrical].”
HBG opposed Tennessee Electrical’s motion. HBG’s response countered the
assertion that the motion for default judgment was not sent. When mailing the motion for
default judgment, HBG counsel claimed to have “used an approved license vendor of the
United States Postal Service for its purchase and printing of stamps, Stamps.com” that
“track[ed] the dates and addresses to which correspondence [wa]s sent.” Additionally,
HBG emphasized that Tennessee Electrical had not denied being served with the petition
for declaratory judgment. So HBG argued a willful default because Tennessee Electrical
“ha[d] not provided any explanation or proof as to why it has not filed a responsive
pleading in this action.” HBG supported its response with (1) an affidavit of HBG’s
counsel’s affirming that he deposited the envelopes with USPS and that nothing had been
returned as undeliverable and (2) printouts from Stamps.com purportedly showing
delivery of mailings to Mr. Gandee.
On February 7, 2018, Tennessee Electrical finally filed an answer to the petition
for declaratory judgment. The answer denied all material allegations and alleged, among
other things, that HBG “dramatically changed the scope of the required work subsequent
to the initiation of the job.” Tennessee Electrical also replied to HBG’s response to the
motion to set aside. The reply included an affidavit from Mr. Gandee in which he denied
receiving “notification of a Motion for Default Judgment.”
The court denied Tennessee Electrical’s motion to set aside. The court found
Tennessee Electrical “was served with the Petition for Declaratory Judgment on July 5,
2017, and that it was dilatory in responding.” The court further found that Tennessee
Electrical had not requested relief from the thirty day response requirement imposed by
the Tennessee Rules of Civil Procedure. It concluded that Tennessee Electrical’s failure
to timely file a response with no application for relief constituted a willful default.
II.
A.
Tennessee Electrical’s sole issue on appeal is “[w]hether the trial court erred in
failing to set aside the Order Granting Default Judgment on August 31, 2017.” As
grounds to set aside the default judgment, Tennessee Electrical relied on Rule 60.02 of
the Tennessee Rules of Civil Procedure. But because Tennessee Electrical sought relief
within thirty days of the entry of the default judgment, we conclude the appropriate
analysis is under Rule 59.04. See Discover Bank v. Morgan, 363 S.W.3d 479, 488-89
(Tenn. 2012). But see Tenn. R. Civ. P. 55.02. Under either Rule 60.02 or 59.04, we
review the trial court’s decision under the abuse of discretion standard. Discover Bank,
3
363 S.W.3d at 487. So we consider whether “the trial court applied incorrect legal
standards, reached an illogical conclusion, based its decision on a clearly erroneous
assessment of the evidence, or employed reasoning that cause[d] an injustice to the
complaining party.” Id. (quoting State v. Jordan, 325 S.W.3d 1, 39 (Tenn. 2010)).
In the trial court, Tennessee Electrical sought relief from the default judgment on
the basis of “a mistake and/or misrepresentation by the opposing party” in claiming that
the motion for default judgment was served. See Tenn. R. Civ. P. 60.02 (“[T]he court
may relieve a party . . . from a final judgment . . . for . . . fraud (whether heretofore
denominated intrinsic or extrinsic), misrepresentation, or other misconduct of an adverse
party.”). Tennessee Electrical denied receiving the motion for default judgment or notice
of the hearing on the motion. HBG responded as if Tennessee Electrical was asserting
“excusable neglect” rather than some misconduct on the part of its counsel. The trial
court also analyzed the motion to set aside as if Tennessee Electrical was relying upon
excusable neglect. See Henry v. Goins, 104 S.W.3d 475, 480 (Tenn. 2003) (“When a
party has no notice of a critical step in a court proceeding, the circumstances may make
out a case of excusable neglect.”).
If we analyze the request to set aside based on alleged “misconduct of an adverse
party,” Tennessee Electrical did not carry its burden of proof. Furlough v. Spherion Atl.
Workforce, LLC, 397 S.W.3d 114, 128 (Tenn. 2013) (“A party seeking relief under Rule
60.02 must substantiate the request with clear and convincing evidence.”). HBG’s
motion for default judgment included a certificate of service. And a certificate of service
“is prima facie 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.” Orr v. Orr, No. 01-A-01-9012-CH-00464, 1991 WL 226916, at *4 (Tenn.
Ct. App. Nov. 6, 1991); cf. Patterson v. SunTrust Bank, 328 S.W.3d 505, 510-11 (Tenn.
Ct. App. 2010) (finding no abuse of discretion in trial court’s decision to “grant[] a
default judgment in response to an untimely answer filed without explanation or
‘application to the court for relief’” (quoting State ex rel. Jones v. Looper, 86 S.W.3d
189, 196 (Tenn. Ct. App. 2000))). Although it may have rebutted the presumption of
receipt, Tennessee Electrical offered no evidence of a misrepresentation or misconduct by
HBG or its counsel.
If we analyze the request to set aside based on excusable neglect, the threshold
inquiry is whether the defaulting party’s conduct that precipitated the default was willful.
Discover Bank, 363 S.W.3d at 494. If the defaulting party’s conduct was willful, the
court need not address the remaining factors of whether the defaulting party had a
meritorious defense and whether the non-defaulting party would be prejudiced if the
default judgment were set aside. Id.
Here, the court found that Tennessee Electrical’s conduct precipitating the default
was willful. Willful conduct includes “deliberate choices” and “conduct that is flagrant
4
and unexplained.” Id. at 493 (quoting Barber & McMurry, Inc. v. Top-Flite Dev. Corp.,
720 S.W.2d 469, 471 (Tenn. Ct. App. 1986), and Hayes v. Hayes, No. M2006-02356-
COA-R3-CV, 2007 WL 2580026, at *2 (Tenn. Ct. App. Sept. 6, 2007)). While providing
some proof and an explanation as to why it did not respond to the motion for default
judgment, Tennessee Electrical never addressed its failure to respond to the petition for
declaratory judgment until almost six months after entry of default judgment.
The trial court correctly assessed the evidence. Tennessee Electrical’s failure to
respond to the petition for declaration was both flagrant and unexplained. The rules
allowing motions to set aside a default judgment were “not intended to rescue a party
who failed to answer a complaint for no good reason.” Pache Indus., LLC v. Wallace
Hardware Co., No. E2003-01483-COA-R3-CV, 2003 WL 22668854, at *5 (Tenn. Ct.
App. Nov. 12, 2003). Where a record lacks an explanation for a flagrant violation of the
procedural rules, the conduct is “‘willful’ and therefore ineligible for relief on grounds of
‘excusable neglect.’” Discover Bank, 363 S.W.3d at 494-95; see also In re I.G., No.
M2015-01974-COA-R3-JV, 2016 WL 8077967, at *5 (Tenn. Ct. App. Dec. 2, 2016)
(concluding that the father’s conduct was willful when, among other things, he “failed to
file a timely response to the mother’s petition, despite being ‘fully aware’ of the court
proceedings”); McBride v. Webb, No. M2006-01631-COA-R3-CV, 2007 WL 2790681, at
*3 (Tenn. Ct. App. Sept. 25, 2007) (concluding that the defendant’s conduct in failing to
respond to the complaint was willful whether or not she actually received the motion for
default judgment).
The trial court did not abuse its discretion in denying Tennessee Electrical’s
motion to set aside the default judgment.1 Tennessee Electrical failed to carry its burden
of proof to justify relief from the judgment.
B.
HBG asserts that this appeal is frivolous, entitling it to damages, including
attorney’s fees and expenses incurred on appeal. Under Tennessee Code Annotated § 27-
1-122 (2017), an appellate court may award damages against an appellant if an appeal is
frivolous or taken solely for delay. The statute authorizing an award of damages for
1
For the first time on appeal, Tennessee Electrical also argues that the trial court erred in granting
a default judgment because HBG failed to establish proper service of the motion for default judgment
under Rule 4.04 of the Tennessee Rules of Civil Procedure. Because Tennessee Electrical did not raise
this issue in the trial court, we deem it waived. See Barnes v. Barnes, 193 S.W.3d 495, 501 (Tenn. 2006)
(“Issues not raised in the trial court cannot be raised for the first time on appeal.”). Additionally, we note
that Rule 4.04 addresses service of the summons and complaint, which Tennessee Electrical
acknowledges is not in question. See Tenn. R. Civ. P. 4.04. Rule 5 governs the service of motions. See
Tenn. R. Civ. P. 5.
5
frivolous appeals “must be interpreted and applied strictly so as not to discourage
legitimate appeals.” See Davis v. Gulf Ins. Grp., 546 S.W.2d 583, 586 (Tenn. 1977)
(citing the predecessor to Tennessee Code Annotated § 27-1-122).
A frivolous appeal is one “utterly devoid of merit,” Combustion Eng’g, Inc. v.
Kennedy, 562 S.W.2d 202, 205 (Tenn. 1978), or that has “no reasonable chance of
success,” Davis, 546 S.W.2d at 586. We do not find this appeal to be frivolous. So we
deny HBG’s request for attorney’s fees and expenses incurred on appeal.
III.
Based on the foregoing, we affirm the trial court’s denial of Tennessee Electrical’s
motion to set aside default judgment. The case is remanded for such further proceedings
as may be necessary and consistent with this opinion.
_________________________________
W. NEAL MCBRAYER, JUDGE
6