Opinion
NO. 2016-CA-000400-MR
01-12-2018
AARON K. HILL APPELLANT v. CMCO MORTGAGE, LLC APPELLEE
BRIEF FOR APPELLANT: C. Thomas Hectus Louisville, Kentucky BRIEF FOR APPELLEE: Elisabeth S. Gray Louisville, Kentucky Katherine T. Reisz Louisville, Kentucky
NOT TO BE PUBLISHED APPEAL FROM JEFFERSON CIRCUIT COURT
HONORABLE BARRY WILLETT, JUDGE
ACTION NO. 12-CI-001097 OPINION
AFFIRMING
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BEFORE: KRAMER, CHIEF JUDGE; DIXON AND NICKELL, JUDGES. DIXON, JUDGE: Appellant, Aaron Hill, appeals from an order of the Jefferson Circuit Court denying his CR 60.02 motion to vacate a default judgment and order awarding Appellee, CMCO Mortgage, LLC d/b/a Home Lending Source ("HLS"), compensatory damages in the amount of $3,417,477. Finding no error, we affirm.
The procedural history in this matter is convoluted at best. In February 2012, HLS filed suit against Hill and others for wrongful recruiting and raiding of HLS's employees from its Louisville and Indianapolis "Internet Division" offices, as well as for Hill's alleged theft of HLS's proprietary information. Hill filed an answer and asserted numerous counterclaims against HLS. Subsequently in July 2013, HLS settled with all defendants except Hill. Thereafter, Hill's prior counsel (who had represented all the defendants) filed a motion to withdraw. On October 2, 2013, the trial court granted the motion and ordered Hill to retain new counsel within forty-five days. Hill apparently did not retain new counsel and subsequently failed to appear in court on January 13, 2014, for a hearing on HLS's motion for a trial date and other related deadlines. Following the motion hour, HLS's counsel sent an email to Hill advising him that the trial court had scheduled a tentative trial date of September 22, 2014, as well as a final pretrial hearing date of August 19, 2014. Hill immediately responded, "Ok thanks Libby."
On July 29, 2014, HLS filed a motion for sanctions pursuant to CR 37.02 based upon Hill's failure to comply with the trial court's Second Civil Jury Trial Order entered on February 11, 2014. Subsequently, when Hill failed to appear at the scheduled August 19, 2014 final pretrial hearing, the trial court granted HLS's motion and entered a default judgment against Hill. As a result, the trial court ruled that the bench trial scheduled for September 22, 2014, would be limited to damages.
The record indicates that HLS's counsel served all pleadings on Hill via email.
On September 19, 2014, three days prior to the trial on damages, Hill contacted the trial court and was personally advised by Judge Willett that "he should appear . . . for trial . . . or adverse consequences would result." Hill subsequently did not appear for trial on September 22, 2014. At the beginning of the trial, Judge Willett recounted on the record his conversation with Hill:
Hill first contacted the trial court and left a message. Judge Willett attempted to return the call but could not reach Hill. Hill again contacted the Judge on September 19, 2014, and the two spoke at that time.
[Hill] called me again on Friday and it took me a minute to figure out who it was that was calling and what case it was, but my memory finally got jogged, and he was basically kind of asking . . . "What do I do? We got this hearing date coming up - what do I do?" And I said to him, "Well, it'll be a hearing on damages only. A judgment was entered against you. In my opinion you need to have an attorney come appear at the damage hearing or at least appear on your own, or adverse things will happen to you." And he proceeded to want to tell me about the steps that the Plaintiff had taken to damage him financially and put him into bankruptcy and I stopped him and said "I really can't talk to you about the substance of the case. You're a party, you have the right to be here at the hearing on Monday and if you don't, adverse things will likely happen to you.", and I left it at that. It was a conversation that lasted maybe 3 or 4 minutes. So, I just wanted to make sure that you knew that and that was on the record.HLS then presented its witnesses and evidence pertaining to damages. Based on the evidence presented at trial, the trial court entered a judgment against Hill on October 3, 2014, in the amount of $3,417,477, to be compounded annually at twelve percent (12%) interest.
On September 25, 2014, HLS's counsel filed proposed findings with the trial court and also served Hill by email.
Notably, Hill did not appeal either the default judgment or the order awarding damages. Instead, on September 29, 2014, one week after the trial but prior to entry of the trial court's judgment, Hill filed a petition for bankruptcy in the United States Bankruptcy Court for the Western District of Kentucky. Over six months later, on April 2, 2015, Hill filed a motion in the trial court to set aside the default judgment and order awarding damages. Therein, he argued that although he was aware of the proceedings, and in particular the entry of the default judgment and the trial date on damages, he had been advised by bankruptcy counsel not to attend the trial since he was filing for bankruptcy and would therefore be under the protection of that court. Hill stated in his affidavit that once he received the judgment and order dated October 3, 2014, he retained counsel to file a CR 60.02 motion. Hill claimed that because "he committed a mistake in failing to recognize the importance of the trial, and it was inadvertent on his part[,]" such warranted granting his motion pursuant to CR 60.02(a) and (f). Following a hearing, the trial court denied the motion by order entered on April 13, 2015.
In June 2015, the bankruptcy court lifted its automatic stay with respect to the trial court's judgment awarding damages. HLS then filed a motion for summary judgment in the bankruptcy court seeking a determination that the trial court's judgment was non-dischargeable because Hill's conduct in the underlying action constituted a "willful and malicious" injury. Hill filed a response and requested oral arguments. Oral arguments were heard on October 6, 2015. On November 2, 2015, the bankruptcy court granted HLS's motion for summary judgment finding, in pertinent part:
• Collateral estoppel applied because Hill's actions were adjudged by the Jefferson Circuit Court as "willful, intentional, in bad faith, egregious, and done with malice[;]"
• Hill "actually litigated" the issues of his alleged willful and malicious conduct when he "retained an attorney, filed an answer, asserted counterclaims, and participated in discovery," even after his counsel withdrew;
• Hill's "strategic decision to abandon his defense late in the proceeding [did] not undo his earlier active participation in the litigation[;]"
• Hill deliberately or otherwise intentionally set about to delay or interfere with the trial in the state court litigation;
• Hill's contention that notices were sent to a Kansas address would be rejected because he had "actual notice of the state court action prior to the [judgment] being entered" and "vigorously defended the action for a large portion of the case[;]"
• Hill's "notice of the existence of the state court action supports a finding that he was afforded an opportunity to litigate these issues[;]"
• Hill did not "allege a [lack] of notice as grounds for setting aside the judgment" in his April motion but rather "argued that the judgment should be set aside because he had been advised by an attorney not to attend the trial due to the bankruptcy case[.]"
In the interim, however, on October 5, 2015, which was one day prior to the bankruptcy oral arguments, Hill filed a second CR 60.02 motion in the trial court to set aside the judgment and order. In his supporting affidavit, Hill claimed that (1) he had no notice of the order setting the pretrial hearing date or trial date; (2) he was unaware that a default judgment had been entered against him; and (3) that he would have attended the trial but for his bankruptcy attorney's advice that he should not appear at trial. Hill stated that he had no notice of any pleadings or scheduled dates during the course of the litigation and that, although he had spoken with Judge Willett, the judge did not inform him that a default judgment had been entered against him. As he did in his first CR 60.02 motion, Hill claimed that mistake and inadvertence on his part warranted setting aside the default judgment.
Interestingly, HLS notes that during the bankruptcy oral arguments the following day, Hill made no mention to the court or opposing counsel that he had filed a second motion to vacate in the trial court. --------
On January 21, 2016, the trial court held an extensive hearing on Hill's second CR 60.02 motion. Therein, HLS produced twenty-one separate filings that had been served on Hill via email, as well as correspondence between him and HLS's counsel. Significantly, Hill's bankruptcy counsel also submitted an affidavit stating that he had never represented Hill on any matter not related to the bankruptcy proceedings and that he had never advised Hill to ignore the trial court's admonition that he needed to appear at trial. Counsel stated that he "would not advise a client not to participate in a court proceeding."
By order entered March 15, 2016, the trial court denied Hill's CR 60.02 motion, finding that the judgment was adequately supported by the record. Hill then appealed to this Court. Additional facts are set forth as necessary in the course of this opinion.
The decision whether to grant or to deny a motion filed pursuant to the provisions of CR 60.02 lies within the sound discretion of the trial court, and will not be disturbed absent an abuse of that discretion. See Schott v. Citizens Fidelity Bank and Trust Co., 692 S.W.2d 810 (Ky. App. 1985); Kurtsinger v. Board of Trustees of Kentucky Retirement Systems, 90 S.W.3d 454, 456 (Ky. 2002) (citation omitted). "The test for abuse of discretion is whether the trial judge's decision was arbitrary, unreasonable, unfair, or unsupported by sound legal principles." Goodyear Tire & Rubber Co. v. Thompson, 11 S.W.3d 575, 581 (Ky. 2000) (citation omitted). We will affirm the trial court's decision absent a "flagrant miscarriage of justice[.]" Gross v. Commonwealth, 648 S.W.2d 853, 858 (Ky. 1983).
In this Court, Hill argues that trial court's refusal to vacate either the default judgment or the order awarding damages was an abuse of discretion. Hill contends that he was unaware of the scheduled pretrial hearing because the pretrial order was mailed to the wrong address. As such, he argues that "there was reasonable cause for the default." Further, with respect to his failure to appear at trial, Hill contends that his "non-compliance was not a result of willfulness or bad faith," but was rather because he relied on his bankruptcy attorney's advice not to appear.
CR 60.02 provides, in relevant part:
On motion a court may, upon such terms as are just, relieve a party or his legal representative from its final judgment, order, or proceeding upon the following grounds: (a) mistake, inadvertence, surprise or excusable neglect; . . . or (f) any other reason of an extraordinary nature justifying relief. The motion shall be made within a reasonable time, and on grounds (a), (b), and (c) not more than one year after the judgment, order, or proceeding was entered or taken. A motion under this rule does not affect the finality of a judgment or suspend its operation.The purpose of CR 60.02 is "to provide relief where the reasons for the relief are of an extraordinary nature." Ray v. Commonwealth, 633 S.W.2d 71, 73 (Ky. App. 1982). Moreover, because the law favors the finality of judgments, the rule "requires a very substantial showing to merit relief under its provisions." Ringo v. Commonwealth, 455 S.W.2d 49, 50 (Ky. 1970). Therefore, relief may be granted under CR 60.02 only with extreme caution and "where a clear showing of extraordinary and compelling equities is made." Bishir v. Bishir, 698 S.W.2d 823, 826 (Ky. 1985). A trial court may grant relief under CR 60.02 only if a movant demonstrates "he is entitled to this special, extraordinary relief." Gross, 648 S.W.2d at 856 (Ky. 1983).
CR 55.02 provides a mechanism whereby a trial court may set aside a default judgment in accordance with CR 60.02 for "good cause shown[.]" Kentucky courts have interpreted the "good cause" standard under CR 55.02 as requiring "the moving party to make a timely showing of the circumstances under which the default judgment was procured. Specifically, the moving party must show: (1) a valid excuse for the default; (2) a meritorious defense to the claim; and (3) absence of prejudice to the non-defaulting party." Sunrise Turquoise, Inc. v. Chem. Design Co., 899 S.W.2d 856, 859 (Ky. App. 1995) (citing Perry v. Central Bank & Trust Co., 812 S.W.2d 166, 170 (Ky. App. 1991)). Absent a showing of all three elements, the default judgment will not be set aside. Sunrise, 899 S.W.2d at 859. "Although default judgments are not favored, trial courts possess broad discretion in considering motions to set them aside and we will not disturb the exercise of that discretion absent abuse." Howard v. Fountain, 749 S.W.2d 690, 692 (Ky. App. 1988) (citing Kidd v. B. Perini & Sons, 313 Ky. 727, 233 S.W.2d 255 (1950)); PNC Bank, N.A. v. Citizens Bank of Northern Kentucky, Inc., 139 S.W.3d 527, 530-31 (Ky. App. 2003).
Unfortunately for Hill, we must conclude that he has unquestionably failed to satisfy the first element, in that he does not have a valid excuse for the default. To be sure, the record reveals that several pleadings, including the pretrial order, were sent to an erroneous Kansas address. Nevertheless, Hill was also copied by email on all pleadings, as well as notified by opposing counsel as to all hearing dates. What is truly astounding is that Hill now contends that he was unaware of the pretrial order and hearing date despite having stated in the first April CR 60.02 motion that he had received certified mail from the circuit court clerk and that he was aware of both. Mere carelessness on a party's part is an insufficient reason to set aside a default judgment. Perry, 812 S.W.2d at 170. Because Hill has not satisfied the first element necessary to establish good cause for setting aside the default judgment, we need not address the other two. Sunrise, 899 S.W.2d at 859.
With respect to the order awarding damages, we also conclude that Hill has simply not demonstrated that he is entitled to the extraordinary relief afforded by CR 60.02. As previously noted, relief pursuant to CR 60.02 is an extraordinary remedy which should be cautiously granted. The rule may be invoked in six particular instances: "(a) mistake, inadvertence, surprise, or excusable neglect; (b) newly discovered evidence . . . ; (c) perjury or falsified evidence; (d) fraud affecting the proceedings . . . ; (e) the judgment is void . . . ; or (f) any other reason of an extraordinary nature justifying relief." Kurtsinger, 90 S.W.3d at 456 (quoting CR 60.02). A primary factor guiding the grant of CR 60.02 relief is the moving party's inability to present his claim prior to the entry of the order sought to be set aside. Fortney v. Mahan, 302 S.W.2d 842, 843 (Ky. 1957); Young v. Edward Technology Group, Inc., 918 S.W.2d 229, 231 (Ky. App. 1995) (citation omitted) (explaining CR 60.02 serves a dual purpose: "to bring before a court errors which (1) had not been put into issue or passed on, and (2) were unknown and could not have been known to the moving party by the exercise of reasonable diligence and in time to have been otherwise presented to the court").
The trial judge herein confirmed on the record at the beginning of the trial on damages that he had personally spoken with Hill, had advised him of the default judgment and trial date, and warned him that adverse consequences would result if he failed to appear. Furthermore, Hill's bald assertion that his bankruptcy counsel advised him not to appear at trial is contradicted by that counsel's affidavit. As the bankruptcy court noted, Hill made a "strategic decision to abandon his defense late in the proceeding" despite HLS's continuous efforts to notify him of upcoming deadlines by emailing and serving him with all of the pleadings, as well as an admonishment from the trial court that he needed to appear at trial. In his affidavit attached to the first CR 60.02 motion, Hill even admitted that he was aware of the default judgment but "committed a mistake in failing to recognize the importance of the trial."
Notably, Hill did not file an appeal from the trial court's default judgment, the October 3, 2014, order awarding damages, or the trial court's denial of his first CR 60.02 motion. "Civil Rule 60.02 is not intended merely as an additional opportunity to relitigate the same issues which could 'reasonably have been presented' by direct appeal . . . ." McQueen v. Commonwealth, 948 S.W.2d 415, 416 (Ky. 1997), cert. denied, 521 U.S. 1130 (1997) (quoting RCr 11.42(3)). Kentucky's highest court has consistently held that "issues which could have been presented in an initial motion to vacate judgment cannot thereafter be raised by subsequent motions." Lycans v. Commonwealth, 511 S.W.2d 232, 233 (Ky. 1974) (citation omitted). It is beyond disingenuous for Hill to argue at this point that his claims were "unknown and could not have been known to [him] by the exercise of reasonable diligence and in time to have been otherwise presented to the court." Brozowski v. Johnson, 179 S.W.3d 261, 263 (Ky. App. 2005) (citation omitted).
We are of the opinion that this appeal is nothing more than a frivolous attempt to circumvent Hill's utter failure to participate in the underlying litigation. Hill's claim at this late date that he did not receive notice of the pretrial order and default judgment is simply untruthful and contradicted by his own March 31, 2015 affidavit attached to his first CR 60.02 motion. Hill willingly chose to abandon his defense, even after he was admonished by the trial court of the dangers associated of doing so, and subsequently chose not to pursue an appeal of the trial court's orders. As a result, Hill is certainly not entitled to CR 60.02 relief and the trial court did not abuse its discretion in denying his motion.
For the reasons set forth herein, we affirm the order of the Jefferson Circuit Court.
ALL CONCUR. BRIEF FOR APPELLANT: C. Thomas Hectus
Louisville, Kentucky BRIEF FOR APPELLEE: Elisabeth S. Gray
Louisville, Kentucky Katherine T. Reisz
Louisville, Kentucky