Flagstar Bank, FSB v. Danos
| Docket Number: | 2007-CT-00418-SCT Linked Case(s): 2007-CA-00418-SCT ; 2007-CT-00418-SCT ; 2007-CA-00418-COA ; 2007-CA-00418-COA ; 2007-CT-00418-SCT ; 2007-CT-00418-SCT |
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| Supreme Court: | Opinion Link Opinion Date: 08-19-2010 Opinion Author: Carlson, P.J. Holding: Court of Appeals reversed; Circuit court reinstated and affirmed. |
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| Additional Case Information: |
Topic: Default judgment - M.R.C.P. 4(c)(5) & (d)(4) - Service of process - M.R.C.P. 55(b) - M.R.C.P. 60(b)(4) & (6) Judge(s) Concurring: Graves, P.J., and Kitchens, J. Non Participating Judge(s): Chandler, J. Dissenting Author : Dickinson, J., Dissents With Separate Written Opinion. Concur in Part, Concur in Result 1: Randolph, J., Concurs in Part and in Result With Separate Written Opinion Concur in Part, Concur in Result Joined By 1: Lamar, J.; Dickinson and Pierce, JJ., Join In Part. Concur in Part, Dissent in Part 1: Pierce, J., Concurs in Part and Dissents in Part With Separate Written Opinion Concur in Part, Dissent in Part Joined By 1: Waller, C.J. Procedural History: Bench Trial Nature of the Case: CIVIL - OTHER Writ of Certiorari: yes Appealed from Court of Appeals |
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| Trial Court: |
Date of Trial Judgment: 03-12-2007 Appealed from: Lamar County Circuit Court Judge: R. I. Prichard, III Disposition: Calvin and Jamie Danos, individually and as guardians and next friends of Laura Matherne, a minor, Gavin Danos, a minor, and Marissa Danos, a minor (the Danoses), filed a petition for writ of certiorari after the Court of Appeals reversed the Lamar County Circuit Court’s judgment entered in their favor against Flagstar Bank, FSB (Flagstar), and rendered judgment in favor of Flagstar. Case Number: 2004-108P |
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| Note: | This opinion reverses a previous judgment by the Court of Appeals, and reinstates the original trial court judgment. See the COA opinion at: http://www.mssc.state.ms.us/Images/Opinions/CO51500.pdf | |
| Party Name: | Attorney Name: | Brief(s) Available: | ||
| Appellant: | Flagstar Bank, FSB |
CAMILLE HENICK EVANS |
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| Appellee: | Calvin and Jamie Danos, Individually and as Guardians and Next of Friends of Laura Matherne, a Minor, Gavin Danos, a Minor and Marissa Danos, a Minor | CATHERINE H. JACOBS | ||
Synopsis provided by:  If you are interested in subscribing to the weekly synopses of all Mississippi Supreme Court and Court of Appeals hand downs please contact Tammy Upton in the MLI Press office. |
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| Topic: | Default judgment - M.R.C.P. 4(c)(5) & (d)(4) - Service of process - M.R.C.P. 55(b) - M.R.C.P. 60(b)(4) & (6) |
| Summary of the Facts: | Calvin and Jamie Danos, individually and as guardians and next friends of Laura Matherne, a minor, Gavin Danos, a minor, and Marissa Danos, a minor, filed suit against Flagstar Bank, FSB and other defendants. Flagstar was a nonresident corporation not doing business in Mississippi, and thus with no agent in the state to receive service of process. The Danoses attempted service of process by certified mail with “restricted delivery, return receipt requested” to Albert Gladner, the registered agent for Flagstar, at a post office box in Troy, Michigan. The restricted-delivery summons was signed for, returned, and filed with the Lamar County Circuit Court. The signature on the receipt was illegible. The docket entry reads: “Summons returned–certified mail as to Flagstar Bank signed for 4-15-04 by ?, filed.” Attached to a subsequent pleading was a letter dated April 26, 2004, from Robert K. Fleming, the operations coordinator for Flagstar’s legal department in Troy, Michigan, addressed to Catherine Jacobs, counsel for the Danoses, stating that the loan account was sold to Chase Manhattan Mortgage, Inc. On September 11, 2006, the Danoses filed an application for entry of default as to Michael Burks, with the customary accompanying affidavit of the plaintiffs’ attorney, resulting in the circuit clerk filing an entry of default on the same day. However, the Danoses never filed an application for entry of default against Flagstar due to its failure to answer the complaint; thus, there was no clerk’s entry of default against Flagstar. On September 25, 2006, the trial judge entered a default judgment against Flagstar. At the hearing to assess damage, Flagstar was not present, nor did it have counsel present. At the conclusion of the hearing, the trial judge, on the same day, entered a judgment for damages in the amount of $500,000 against both Flagstar and Burks. Thereafter, an attorney for Flagstar filed a motion to set aside the default judgment and for additional relief. The trial court denied the motion to set aside default judgment. Flagstar appealed, and the Court of Appeals reversed the trial court’s judgment denying Flagstar’s motion to set aside the default judgment, and rendered judgment in favor of Flagstar for lack of jurisdiction. The Supreme Court granted certiorari. |
| Summary of Opinion Analysis: | Issue 1: Service of process The critical issue addressed by the Court of Appeals was whether the plaintiffs sufficiently complied with M.R.C.P. 4(c)(5) so as to effect service of process on the defendant Flagstar. The majority based its decision on its finding that the person who signed for the summons was not Gladner, but a mail clerk, whose authority to receive the summons on behalf of Flagstar was not established to be in compliance with the mandate of M.R.C.P. 4(d)(4). However, Rule 4(d)(4) is inapplicable on these facts. Rule 4(c)(5) is silent with regard to whether someone other than the registered agent for service of process for a corporation may sign for a certified letter addressed to the registered agent. So too are the statutes. What is clear, however, from the standpoint of the efficacy of service of process on a foreign corporation by way of certified letter, is that the letter must be properly addressed to the person authorized to receive process on behalf of the corporation and actually delivered to that address. That was done in this case, as it is clear from the record that the letter was properly addressed and that it reached its destination. The operations coordinator for Flagstar’s legal department admitted to having received the process. Further, the Danoses’ attempted service on Flagstar with “restricted delivery” does not in-and-of-itself render the attempted service invalid. The Danoses were not required to send the letter restricted delivery; the fact that they went the extra step should not be viewed as noncompliance with Rule 4(c)(5). Thus, service of process was proper. Issue 2: Default judgment The trial court entered a default judgment pursuant to M.R.C.P. 55(b). Flagstar argues that the trial court erred when it failed to apply properly the three-prong balancing test in ruling on Flagstar’s Rule 60(b) motion to set aside default judgment. Although Flagstar does not specify what subsection of M.R.C.P. 60(b) applies to justify granting relief from the judgment entered against it, much of Flagstar’s focus throughout the life of this case has been on whether it was effectively served with process. Such an assertion would justify relief from the judgment pursuant to Rule 60(b)(4). Additionally, Rule 60(b)(6) is always available for an aggrieved party to seek relief from a judgment. The equitable factors that must be considered by the trial courts in determining whether a default judgment should be set aside include the nature and legitimacy of the defendant’s reasons for his default, i.e., whether the defendant has good cause for default; whether the defendant in fact has a colorable defense to the merits of the claim; and the nature and extent of prejudice which may be suffered by the plaintiff if the default judgment is set aside. The totality of the record in this case, including the trial judge’s memorandum opinion and order, shows that the trial judge applied the required three-prong balancing test. The “good-cause” prong of the test does not pertain to “good cause” to set aside the default judgment. Rather, the “good-cause” prong refers to whether the defendant can show “good cause” for its default. The only facts Flagstar presented to the trial judge pertained to “good cause” to set aside the default judgment. The only argument presented by Flagstar that could apply toward “good cause” for the default was that service of process was improper. Because service of process was effected on Flagstar, this prong weighs in favor of the Danoses. The “colorable-defense” prong is the most important factor. Flagstar made several principal arguments regarding “colorable defenses” in its motion to set aside the default judgment. First, Flagstar argued that service of process was deficient. Flagstar also argued as a “colorable defense” that it could not be held liable, as a matter of law, for the injuries complained of by the Danoses. Flagstar’s agent, who provided the sole basis for its alleged vicarious liability, was dismissed from the case. Since there is a valid argument that no agency relationship existed between Flagstar and the other defendants in the case that would have served as the basis for vicarious liability otherwise, this certainly could be deemed to be a “colorable defense” to the Danoses’ claims against Flagstar. Thus, this prong would appear to weigh in favor of Flagstar. The operations coordinator in Flagstar’s legal department, through simple arithmetic, easily could have calculated that, in order to protect Flagstar’s interests in this litigation commenced by the Danoses by assuring that a default judgment would not be entered against it, regardless of Flagstar’s opinion as to the merits of the Danoses’ assertions against Flagstar, responsive pleadings were required to be filed by May 22, 2004. Instead, the record reveals that Flagstar, throughout the history of this litigation, rolled the dice on its claim that the Danoses had failed to effect legal process upon it such that a lawful judgment could not be entered against it. Thus, the trial court did not exceed its authority or abused its discretion in refusing to set aside the default judgment entered against Flagstar. |
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