Sewell v. Lube

321 P.3d 1080

745 Utah Adv. Rep. 57

Larry SEWELL, Plaintiff and Appellee,

v.XPRESS LUBE, Defendant and Appellant.

No. 20120445.

Supreme Court of Utah.

Oct. 18, 2013.

Nicholas Isaac Chamberlain, St. George, for appellee.

Paul M. Belnap, David E. Brown, Salt Lake City, for appellant.

Justice PARRISH, opinion of the Court:

INTRODUCTION

¶ 1 Xpress Lube appeals from the district court's order denying its motion to set aside a default judgment in favor of Larry Sewell. Sewell fell into a service pit at Xpress Lube, which is a sole proprietorship of Bruce Anderson. Sewell alleged injuries resulting from the fall, and his attorney thereafter began negotiating with Travelers Insurance (Travelers), Anderson's insurance carrier. When negotiations proved unsuccessful, Sewell filed suit, naming Xpress Lube as the only defendant.

¶ 2 A process server left copies of the summons and complaint with an Xpress Lube employee. Anderson found the summons and complaint several days later and immediately sent them to his insurance agent. The agent attempted to fax the complaint to Travelers, but apparently misdialed the fax number and Travelers never received it.

¶ 3 Sewell moved for default judgment, which the district court granted. Xpress Lube moved to have the default set aside. The district court denied the motion and entered judgment in favor of Sewell for all damages alleged in his complaint. Xpress Lube appeals.

BACKGROUND

¶ 4 On January 15, 2011, Sewell fell into a service pit at Xpress Lube. He was sixty-eight years old, on Medicare, and allegedly unemployed.¹ Xpress Lube is an oil and lube business, of which Anderson is the sole proprietor. On February 3, 2011, Sewell's counsel contacted and informed Anderson's insurer, Travelers, that Sewell had been injured and made a demand for damages. Sewell and Travelers exchanged several settlement offers but were unable to reach an agreement.

¶ 5 After approximately eight months of negotiations, Sewell filed suit. Despite the fact that Sewell's counsel had been negotiating with counsel for Travelers, Sewell's counsel did not inform counsel for Travelers that he was ending negotiations or filing a lawsuit. The suit named “Xpress Lube, a Utah business entity” as the only defendant. Anderson was not named as a party.

¶ 6 Sewell hired a process server to serve the summons and complaint. The process server arrived at Xpress Lube on October 11, 2011, spoke with Brian Deuel, an Xpress Lube employee, and asked to see the person “in charge.” Deuel informed the process server that he was not a manager or a person in charge and that one was not currently available. After several minutes of waiting for a manager or person in charge to return, the process server left the summons and complaint with Deuel.

¶ 7 Deuel placed the summons and complaint on Anderson's office desk. Several days later, Anderson saw the summons and complaint and delivered them to his insurance agent. That same day, the insurance agent attempted to fax a copy of the summons and complaint to Travelers, but the fax was apparently sent to the wrong number. Travelers never received the fax and remained unaware that the complaint had been filed.

¶ 8 On November 21, 2011, just twenty-three days after copies of the summons and complaint had been left at Xpress Lube, Sewell filed a motion for default judgment. He asserts that a copy of the motion was mailed to Xpress Lube. But Anderson claims that he did not receive a copy of the motion for default judgment until December 8, 2011, when he received it in the mail along with a copy of the actual default judgment.

¶ 9 The district court had entered the default judgment on December 6, 2011. Despite the fact that the district court did not hold any evidentiary hearing on damages, it entered judgment against Xpress Lube in the amount of $600,000, the full amount requested by Sewell.²

¶ 10 On December 8, 2011, immediately after receiving copies of the motion for default judgment and the default judgment itself, Anderson took both to his insurance agent and learned that the complaint had never been received by Travelers. That same day, Travelers retained counsel who contacted counsel for Sewell and requested that Sewell stipulate to set aside the default. Sewell's counsel refused.

¶ 11 On December 21, 2011, Xpress Lube filed a motion to set aside the default judgment and a proposed answer to Sewell's complaint. On April 17, 2012, the district court held a hearing and announced from the bench its decision to deny the motion.

¶ 12 The following day, Sewell's counsel submitted a proposed order reflecting the ruling. The district court entered the proposed order the very next day—April 19, 2012. Before Xpress Lube learned that the proposed order had been entered, it filed an objection. The district court thereafter vacated the order. That same day, Xpress Lube filed another motion to set aside default judgment, or in the alternative a motion to reconsider. On May 2, 2012, Sewell again opposed Xpress Lube's motion and submitted yet another proposed order. This new proposed order denied both of Xpress Lube's motions to set aside default judgment and included a provision indicating that Anderson was personally liable for the judgment against Xpress Lube. The district court signed this proposed order on May 4, 2012, and entered it on May 8, 2012.

¶ 13 Xpress Lube appeals. It argues that the district court erred in refusing to set aside the default judgment as void for lack of jurisdiction under rule 60(b)(4) of the Utah Rules of Civil Procedure. It alternatively argues that the district court erred in refusing to set aside the default judgment on grounds of mistake, inadvertence, or excusable neglect under rule 60(b)(1) of the Utah Rules of Civil Procedure. It finally argues that even if the district court did not err in refusing to set aside the default judgment, it erred in awarding Sewell $600,000 in nonliquidated damages without holding an evidentiary hearing.

¶ 14 We elected to retain this appeal and have jurisdiction under Utah Code section 78A–3–102(3)(j).

STANDARD OF REVIEW

¶ 15 Generally, “a [district] court has broad discretion in deciding whether to set aside a default judgment.” Lund v. Brown, 2000 UT 75, ¶ 9, 11 P.3d 277. But that discretion is not unlimited and “should be exercised in furtherance of justice and should incline towards granting relief in a doubtful case to the end that the party may have a hearing.” Helgesen v. Inyangumia, 636 P.2d 1079, 1081 (Utah 1981). Indeed, “it is quite uniformly regarded as an abuse of discretion to refuse to vacate a default judgment where there is reasonable justification or excuse for the defendant's failure to [respond], and timely application is made to set it aside.” Id. (internal quotation marks omitted).

¶ 16 An appellate challenge to a district court's refusal to set aside a default judgment for lack of jurisdiction presents a question of law, for which no discretion is afforded to the district court. See Jackson Constr. Co. v. Marrs, 2004 UT 89, ¶ 8, 100 P.3d 1211.See also Reed v. Reed, 806 P.2d 1182, 1184 n.3 (Utah 1991) (“[W]hether a person is properly served is a question of law.”).

¶ 17 The issue of whether the district court followed rule 55 of the Utah Rules of Civil Procedure, which requires an evidentiary hearing on issues of damages, presents a question of law. We accordingly give no deference to the district court on this issue. See Cadlerock Joint Venture II, LP v. Envelope Packaging of Utah, Inc., 2011 UT App 98, ¶¶ 6, 10, 16, 251 P.3d 837.

ANALYSIS

I. THE DEFAULT JUDGMENT IS VOID FOR LACK OF JURISDICTION

¶ 18 Utah Rule of Civil Procedure 60(b)(4) provides that “the court may in the furtherance of justice relieve a party or his legal representative from a final judgment, order, or proceeding ... [when] the judgment is void.” “A judgment is void under rule 60(b)(4) if the court that rendered it lacked jurisdiction of the subject matter, or parties or the judgment was entered without the notice required by due process.” Judson v. Wheeler RV Las Vegas, L.L.C., 2012 UT 6, ¶ 18, 270 P.3d 456 (internal quotation marks omitted). This is true “even absent a separate meritorious defense. The court's lack of jurisdiction is alone sufficient to void its judgment.” Id. ¶ 15 (footnote omitted). “A motion under rule 60(b)(4) ... could succeed on the basis of a mere showing that the judgment was void because of some defect in the court's authority over the case or the parties.” Id. ¶ 16. Therefore, “[i]f a judgment is entered by a court that lacks jurisdiction, justice is furthered by setting that judgment aside as void under rule 60(b)(4).” Id. ¶ 15.

¶ 19 Xpress Lube argues that the judgment is void. Specifically, it argues that the process server's decision to simply leave copies of the summons and complaint with Deuel, a mere employee of Xpress Lube, did not constitute proper service under rule 4 of the Utah Rules of Civil Procedure. Sewell disagrees. He argues that the “only thing that matters is that the employee in question was completely responsible for all of Appellant's operations and assets, thus satisfying [r]ule 4's requirements for service upon a ‘person in charge.’ ”

¶ 20 Sewell's argument is misplaced because it relies on the wrong subsection of rule 4. Sewell relies on rule 4(d)(1)(E), which states that service on a corporation, partnership, or unincorporated association subject to suit under a common name shall be made “by delivering a copy of the summons and the complaint to an officer, a managing or general agent, or other agent authorized by appointment or by law to receive service of process.” But Xpress Lube is not a corporation, partnership, or unincorporated association. Rather, it is a sole proprietorship of Anderson. Thus, rule 4(d)(1)(E) does not apply.

¶ 21 The defendant named in Sewell's complaint is “Xpress Lube, a Utah business entity.” Anderson is the sole proprietor of Xpress Lube. Becau...