Chief Justice Menis Ketchum
CHARLESTON – The West Virginia Supreme Court of Appeals, in a ruling last week, said a circuit court should have set aside a default judgment against popular breakfast sandwich maker Tudor’s Biscuit World.
The Court, in its opinion Wednesday, reversed the Raleigh County Circuit Court’s March 1, 2011 order denying defendant Tudor’s Biscuit World of America’s motion to alter or amend its Dec. 4, 2009 order denying relief from the default judgment rendered against it.
On appeal, Tudor’s asserts that the lower court erred in its application of the “reasonable time” requirement set forth in West Virginia Rule of Civil Procedure 60(b) to its motion to set aside the default judgment.
The company also argues that the circuit court improperly applied and weighed the factors set forth in a 1979 state Supreme Court ruling, Parsons v. Consolidated Gas Supply Corporation, in denying its motion for relief from judgment.
The state’s high court agreed, remanding the case to the Raleigh Circuit Court.
“We find that charging Tudor’s with the lapse of time which occurred between its ostensible notice of the mere default and its notice of the default judgment was an abuse of the circuit court’s discretion. Tudor’s moved for relief from the default judgment in less than two weeks from its notice of the existence of the judgment,” the justices wrote in their 23-page ruling.
“Therefore, we find that Tudor’s motion to set aside the default judgment was filed within a reasonable period of time.”
The lawsuit stems from plaintiff Della M. Critchley’s fall at a Tudor’s Biscuit World restaurant in Fayette County on Sept. 2, 2002.
After her fall, Critchley filed a workers’ compensation claim against KOR Inc., a franchisee of Tudor’s Biscuit World of America, which owns and operates the Fayette location.
Soon after, on June 10, 2003, Critchley filed a complaint in the Raleigh Circuit Court against Tudor’s alleging she was employed by the defendant and asserting a “deliberate intent” claim against it pursuant to state code.
Her actual employer, KOR, was not named in the lawsuit.
About a year and four months later, on Feb. 23, 2006, a hearing on damages was conducted. However, there is no evidence that a notice of the damages hearing was filed, nor any evidence that Tudor’s was given notice of the hearing. The company did not appear.
The circuit court awarded judgment in the amount of $264,776 to Critchley.
A judgment order was not entered until almost two years and seven months later, on Sept. 2, 2008.
More than a year later, a summons in aid of execution was personally served on John Tudor — three and half years after the judgment was awarded and just more than five years after receipt of the letter from Critchley’s counsel advising of the default.
Two weeks later, on Oct. 16, 2009, Tudor’s made its first appearance in the action, filing a motion to set aside default judgment.
Tudor’s argued that Critchley failed to effectuate proper service of process and, as a result, the default judgment was void.
The circuit court denied Tudor’s motion in an order dated Dec. 4, 2009.
Days later, on Dec. 18, 2009, the company filed a motion pursuant to WVRCP 59(3) to alter or amend the court’s Dec. 4, 2009 order denying its motion to set aside the default, which the court ultimately denied.
The circuit court again found that although the default judgment was void, “defendant had actual knowledge of the default judgment rendered against it… (yet) (t)he defendant did not act upon this knowledge until five years later.”
Tudor’s appealed to the state’s high court.
In its per curiam opinion last week, the Court said the circuit court failed to appreciate a “critical distinction” between a default and default judgment.
A default, it explained, relates to the issue of liability and a default judgment occurs after damages have been ascertained.
Rule 55 has no timeliness requirement in setting aside defaults, whereas Rule 60(b) governing default judgments does, it said.
“The distinction between defaults and default judgments and the rules applicable to each underscores the flawed analysis of the circuit court,” the justices wrote.
The Court said it is “clear” that as of September 2004 the plaintiff had obtained default only.
“A default judgment did not yet exist inasmuch as neither the damages inquiry nor entry of the default judgment order occurred until Feb. 23, 2006 and Sept. 2, 2008, respectively,” the justices wrote.
“The significance of this distinction is that the circuit court applied the timeliness requirement of Rule 60 — which governs relief from judgment — so a period of time in which a judgment did not even exist.”
The circuit court had found because Critchley sued the wrong party — Tudor’s, instead of KOR — Tudor’s delay in filing its motion until well after the statute of limitations had run “foreclosed” her ability to sue the correct party.
The Court also disagreed.
“To the contrary, we find that Critchley’s failure to sue the proper party is attributable to no one but Critchley herself. To assess Critchley’s complete failure of diligence and/or candor in that regard against Tudor’s in any measure is wholly inequitable,” the justices wrote.
“The circuit court clearly overlooked the fact that the statute of limitations had already run on Critchley’s case before her counsel provided notice of the default to Tudor’s on Sept. 30, 2004.
The Court continued, “Critchley fell on Sept. 2, 2002; the statute of limitations applicable to Critchley’s action is two years. As such, the statute of limitations ran on Sept. 2, 2004 — nearly one month before Tudor’s had any awareness whatsoever of the existence of the lawsuit or default.”