Opinion
C.A. No. 96C-09-038 HDR
Submitted: May 15, 2002
Decided: August 27, 2002
Upon Defendant S J Hotel Enterprises' Motion to Vacate Default Judgment and Stay Execution.
GRANTED.
Scott E. Chambers, Esq. of Schmittinger and Rodriguez, P.A., Dover, Delaware, for Plaintiffs.
Thomas J. Eastburn, Esq. of Allmond and Eastburn, Wilmington, Delaware, for Defendant S J Hotel Enterprises, L.L.C.
ORDER
This 27th day of August, 2002, upon consideration of Defendant's motion to vacate default judgment and to stay execution, the arguments of counsel, and the record in this case, it appears that:
(1) Defendant S J Hotel Enterprises, L.L.C. ("SJ"), has moved to vacate a default judgment pursuant to Superior Court Civil Rule 60(b)(1) or (b)(6). Specifically, it seeks an order vacating the judgment asserting a complete defense to the claim, namely that it did not exist or own the premises of the alleged injury at the time of the incident. Alternatively, a credit is sought in the amount of the settlement received by the Plaintiffs from another Defendant pursuant to 10 Del. C. § 6304 and the Joint Tort-Feasor Release executed by Plaintiffs. For the reasons which follow, the Default Judgment against SJ is vacated.
(2) On September 29, 1994, Anita McDonald ("McDonald") was a patron at The Big Kahuna Surf Club in Dover. McDonald was seated watching the entertainment provided by the American Male — All Male Revue ("Revue"). Matthew Greenberg ("Greenberg"), a member of the Revue, jumped onto the chair in which McDonald was seated. The chair collapsed, and as a consequence McDonald sustained injury when she fell onto the floor with Greenberg landing on top of her. McDonald and her husband ("Plaintiffs"), brought suit against J.A.M.S., Inc. the entity operating The Big Kahuna Surf Club ("JAMS"), SJ the entity believed to own the premises, the Revue, Alan Lane the owner of the Revue ("Lane") and Greenberg.
SJ was formed on March 4, 1996, and acquired the property of the alleged injury on March 16, 1996, well after the date of the incident. Public records available September 23, 1996, the date of the initial complaint, substantiate the date of SJ's formation and the date it acquired the property. SJ admits to receipt of the complaint and contends to have responded with a certified letter, dated November 3, 1996, to the Prothonotary and the Plaintiffs' attorney. The letter stated that SJ was not in business at the time of the incident and provided the name and phone number of the entity from whom it purchased the property. SJ also informed its insurance carrier, which declined the claim because the incident occurred prior to the beginning of coverage. SJ took no further action.
JAMS settled with the Plaintiffs for $15,262, at which time a Joint Tort-Feasor Release was executed. The remaining named Defendants, including SJ, failed to respond and a default judgment was entered against them. On June 24, 1999, an inquisition was held and judgment was granted in favor of Plaintiffs as follows: Anita McDonald $62,000.00, future medical costs $4,070.00, and Mark McDonald $3,000.00. SJ argues that it was not served with the default judgment and was unaware of its existence until the property was sold. On March 5, 2002, SJ filed a Motion to Vacate Default Judgment and a Motion to Stay Execution of Judgment. This Court granted a Stay of Execution pending the outcome of this motion.
(3) SJ argues that the default judgment should be vacated as there is no valid claim supporting the judgment. SJ seeks to have the judgment set aside under either section (b)(1) or (b)(6) of Superior Court Civil Rule 60. SJ claims that its failure to follow-up on the complaint amounts to either mistake or excusable neglect as provided under section (b)(1). Alternatively, SJ contends that allowing the judgment to stand would amount to a manifest injustice, which would be prohibited under section (b)(6).
(4) The Plaintiffs' response asserts that SJ is not entitled to relief under Rule 60(b)(1) because its conduct went well beyond excusable neglect or mistake. Plaintiffs argue that SJ's conduct was intentional, willful and not the actions of a reasonably prudent person. They submit that a reasonable commercial entity would have consulted counsel to ascertain its legal rights and obligations. Plaintiffs then argue that SJ's application under Rule 60(b)(6) also fails because no extraordinary circumstances exist.
(5) Default judgments are viewed with disfavor, and a trial on the merits is considered superior. A motion to open a default judgment pursuant to Rule 60(b)(1) and (6) is addressed to the sound discretion of the Trial Court. Rule 60(b) has been accorded a liberal construction because of the underlying policy which favors a trial on the merits to a judgment based on a default.
See Keystone Fuel Oil Co. v. Del-Way Petroleum, Inc., 364 A.2d 826 (Del.Super.Ct. 1976).
Battaglia v. Wilmington Sav. Fund Soc'y, 379 A.2d 1132, 1135 (Del. 1977) (citing Model Fin. Co. v. Barton, 188 A.2d 233 (Del.Super.Ct. 1963)).
Id. (citing Robins v. Garvine, 136 A.2d 549, 552 (Del. 1975)).
(6) Under Superior Court Civil Rule 60(b)(1) a default judgment may be opened for "[m]istake, inadvertence, surprise, or excusable neglect." Carelessness and negligence are not necessarily "excusable neglect." A mere showing of negligence or carelessness without a valid reason may be deemed insufficient. All the surrounding circumstances may be considered in determining the issue. Excusable neglect has been described as that neglect which might have been the act of a reasonably prudent person under the circumstances. However, negligence may be so gross as to amount to sheer indifference, to open and vacate judgment upon such excuse would cease to give meaning to the words "excusable neglect."
See Cohen v. Brandywine Raceway Ass'n, 238 A.2d 320, 325 (Del.Super.Ct. 1968) (citing Prell v. Amado, 406 P.2d 237, 238 (Ariz.Ct.App. 1965)).
See id.
Id.
See id. (citing Tradesmens Natl'l Bank and Trust Co. v. Cummings, 118 A.2d 80 (N.J.Super.Ct. App. Div. 1955)).
See Vechery v. McCabe, 100 A.2d 460 (Del.Super.Ct. 1953).
Under the circumstances and considering all of the parties contentions, I find sufficient mistake or excusable neglect by SJ to justify setting aside the default judgment. SJ notified its liability insurer who denied responsibility because the injury occurred prior to coverage. SJ also claims to have informed the Court and the Plaintiffs that the wrong party had been named. SJ has established that its failure to originally answer Plaintiffs' complaint was due to mistake or excusable neglect. The Court's record does not reflect that the default judgment was served upon SJ.
(7) Having found excusable neglect pursuant to Rule 60(b)(1), two additional questions must be considered before an order may be vacated. First, did the defaulting party make some showing that, if relief is granted, the outcome of the action may be different from what it will be if the default judgment is permitted to stand? This test has been expressed as a requirement that the defaulting party demonstrate a meritorious defense to the underlying action. Second, will substantial prejudice be caused the non-defaulting party by granting the motion?
Battaglia v. Wilmington Sav. Fund Soc'y, 379 A.2d 1132, 1135 (Del. 1977).
Id.
Id.
Both parties now agree that SJ did not own the premises at the date of the injury, and this fact constitutes a meritorious defense. The parties disagree on whether substantial prejudice will be caused. Plaintiffs argue that SJ failed to timely raise its factual defense during the litigation; and this failure denied Plaintiffs the opportunity to discover the circumstances of the conveyance to SJ and then to amend the complaint. Plaintiffs also assert that efforts to enroll this judgment against the New Jersey Defendants will be hampered if the judgment is vacated.
Plaintiffs' argument fails because the circumstances of the conveyance, if relevant, are still discoverable. Additionally, Plaintiffs' assertion that any amended complaint would relate back to the original filing, assumes facts not part of the present record. The statute of limitations for this claim expired before the date the original answer was due. Even had SJ filed a timely answer, the Plaintiffs would have to overcome the relation back rule as set forth in Superior Court Civil Rule 15. Therefore, I find both a meritorious defense and that substantial prejudice will not be caused to Plaintiffs by the vacating of the default judgment against only Defendant SJ.
(8) Having found grounds to open the default judgment, the question of whether SJ is entitled to a credit by virtue of the joint tortfeasor release is rendered moot until SJ is found liable.
NOW, THEREFORE, IT IS ORDERED that SJ's Motion to Vacate Default Judgment and Stay Execution is GRANTED.
IT IS SO ORDERED.