September 13, 1972.
March 27, 1973.
Practice — Judgments — Opening judgment entered by default — Reasonable explanation for default — Misapprehension of counsel — Failure of defendant to receive letters and copy of complaint — Promptness in filing a petition after action on judgment.
1. A petition to open a judgment entered by default is an appeal to the discretion of the court, and before that discretion can be exercised, three factors must be present: (1) the petition is promptly filed; (2) the default is reasonably explained, and (3) a defense is shown to exist on the merits.
2. An order of the court below opening or refusing to open a judgment entered by default will not be reversed unless there has been an error of law or a clear, manifest abuse of discretion.
3. In this case, in which it appeared that the defendant, against which a default judgment had been entered, had never received from counsel a copy of the complaint which had been received from the registered agent of the defendant on which service had been made; that upon receipt of notice of the entry of the default judgment other counsel of defendant being mistaken as to the way in which service of the complaint had been made advised the defendant, inter alia, that the defendant had never been validly served with process and that the default judgment had been obtained on the basis of improper service of the complaint; it was Held, on appeal from the order of the court below opening the judgment, that the misapprehension of counsel as to the method of service of the complaint on the defendant and the fact that the original letters of notification, along with the copy of the complaint, had never been received by defendant, constituted a reasonable explanation of the default and a legal justification for opening the judgment.
4. Where it appeared that defendant retained other counsel after having been served in a suit on a default judgment, who in turn filed a petition within less than two months, it was Held that the court below did not abuse its discretion finding that defendant had acted with sufficient promptness.
Before WRIGHT, P.J., WATKINS, JACOBS, HOFFMAN, SPAULDING, CERCONE and PACKEL, JJ.
Appeal, No. 862, Oct. T., 1972, from order of Court of Common Pleas of Bucks County, Dec. T., 1969, No. 557, in case of Samuel Jacobs Distributors, Inc. v. Conditioned Air, Inc., and Preform Building Components, Inc., and Grennell M. Riggs and Walter Hunt. Order affirmed.
Proceedings upon petition by defendant to open judgment entered by default.
Order entered opening judgment, opinion by WALSH, JR., J. Plaintiff appealed.
Melvin Lashner, with him Adelman Lavine, for appellant.
Frank N. Gallagher, with him Eastburn and Gray, for appellee.
Argued: September 13, 1972.
On November 18, 1969, appellant Samuel Jacobs Distributors, Inc., brought an assumpsit action on a book account against Preform Building Components, Inc., and two additional defendants. The complaint was reinstated January 13, 1970, and on February 27, 1970, appellant obtained a default judgment against appellee in the amount of $24,015.31. "A petition to open a default judgment is an appeal to the Court's discretion, Fox v. Mellon, 438 Pa. 364, 366, 264 A.2d 623 (1970); McDonald v. Allen, 416 Pa. 397, 206 A.2d 395 (1965), and before that discretion will be exercised three factors must be present: (1) the petition to open is promptly filed; (2) the default is reasonably explained, and (3) a defense is shown to exist on the merits. Fox v. Mellon, supra; Wheel v. Park Building, 412 Pa. 545, 195 A.2d 359 (1963)." International Equity Corp. v. Pepper Tanner, Inc., 222 Pa. Super. 118, 125, 293 A.2d 108 (1972). All agree that appellee has shown that it has a defense on the merits. The question here is whether appellee has met the other two criteria for opening a judgment, e.g., promptness and a reasonable explanation of the default. A three-judge Court of Common Pleas of Bucks County heard the case below and concluded that these standards were met. Appellant appeals from their order opening the judgment.
A copy of the complaint had been duly served on appellee's registered agent, Corporation Trust Company, on January 27, 1970. The corporate agent delivered it within a day to Mr. Pepperman, a member of a Wilmington, Delaware law firm which represented appellant in some other matters. Pepperman deposed that on receiving the complaint he dictated a cover letter forthwith, which he subsequently signed and returned to a secretary for mailing along with the complaint to appellant's vice-president. He also signed copies of the letter and returned them in a similar fashion for mailing to appellant's president and counsel in New York, who was representing appellant in all matters relating to the suit and for whom Pepperman's firm was merely "base tending". However, on deposition, all three of the addresses testified that they never received a copy of either the letter or the complaint. There was no evidence of the secretary's ever having mailed the letters. Therefore we cannot presume that they were ever received. See Paul v. Dwyer, 410 Pa. 229, 233, 188 A.2d 753 (1963).
There was additional testimony by a Mr. Gardner that he, too, was a Delaware attorney, employed by the same firm as Pepperman at this time. On March 11, 1970, Gardner received notice of the default judgment from counsel for one of the defendants other than appellee. He was also supplied with a copy of the complaint. Gardner informed appellant's vice-president of this development by telephone and subsequently sent him the following letter, terminating his firm's involvement in the matter:
"Pursuant to our telephone conversation . . ., I herein enclose the following:
1. Correspondence relating to the suit in the Court of Common Pleas of Bucks County . . .;
2. Copy of complaint in assumpsit filed in the above case;
. . .
As you know, the only matter presently pending in the creditors' area is the question of the lawsuit filed by Samuel Jacobs Distributors, Inc., . . . . Although they have purportedly sued Preform Building Components, Inc., in that action, we have never been served with any process as to the same. The letter which I received . . . indicates that they have now taken a default judgment against Preform Building Components, Inc., apparently on the basis of having served one Grennell M. Riggs at 311 West Henderson Avenue, Morrisville, Pennsylvania, as our registered agent. As you have constantly advised me, you do not know Riggs and he has never been associated in any capacity or manner with Preform. . . .
As we have previously discussed, as a practical matter it would not be that difficult for them to secure good service upon us in Pennsylvania, since we do business there, . . . . If they should do this, then of course we would have to go in and defend this case on its merits. In the event that they should attempt to sue in Delaware on this judgment, we would also have to defend at that particular time. As you know, our sole connection with this lawsuit appears to be that . . . one of the defendants, is now an employee of ours and . . . they are apparently proceeding on the basis that . . . when . . . [we hired him we] also agreed to take on all the liability which he and his prior corporations had incurred. I believe this is sufficient information for anyone who must assist you in this matter; . . . ." (R. 160a-161a) (Emphasis added.)
Gardner's mistake as to who had been served with Preform's copy of the complaint may be more clearly understood in light of two facts. First, Pepperman and Gardner often worked at two different offices of their firm. Both testified that at no time did they ever discuss the litigation in question. Since both sent letters which they felt concluded the firm's involvement in the matter, there would have been no reason for either to bring it up. Second, the caption of the complaint read as follows:
"SAMUEL JACOBS DISTRIBUTORS, INC. Deveraux and Tacony Streets Philadelphia, Pennsylvania 19135 vs. CONDITIONED AIR, INC. 311 W. Henderson Avenue Morrisville, Pennsylvania 19068 and PREFORM BUILDING COMPONENTS, INC. 311 W. Henderson Avenue Morrisville, Pennsylvania 19068 and GRENNELL M. RIGGS 311 W. Henderson Avenue Morrisville, Pennsylvania 19068 and WALTER HUNT Jericho Run, Washington Crossing Yardley, Pennsylvania (R. 12a)"
Since the addresses of the first three defendants are all listed as being the same, it becomes apparent why Gardner was misled as to where service on appellee was made, especially since he did not know that Corporation Trust Company had been served or that anyone else in his firm had received a copy of the complaint. "A lower court's ruling opening or refusing to open will not be reversed unless there has been an error of law or a clear, manifest abuse of discretion. Kraynick v. Hertz, 443 Pa. 105, 277 A.2d 144 (1971); Fox v. Mellon, 438 Pa. 364, 264 A.2d 623 (1970);" [other citations omitted]. Balk v. Ford Motor Company, 446 Pa. 137, 140, 285 A.2d 128, 131 (1971). The decision of the court below in the instant case was not such an abuse of discretion.
Appellee's reasonable explanation of the default involves both the unreceived letters and complaint and Gardner's misapprehension as to the method of service on appellee. Errors of this sort have been held to constitute sufficient legal justification to open a default judgment. Balk, id.; Fox v. Mellon, 438 Pa. 364, 264 A.2d 623 (1970) (insurance claims manager erroneously assuming there was time to enter an appearance); Stephens v. Bartholomew, 422 Pa. 311, 220 A.2d 617 (1966), (neglect of counsel in not reading complaint due to being out of town and busy with other clients); Scott v. McEwing, 337 Pa. 273, 10 A.2d 436 (1940), (suit papers mislaid by insurance company); Borjes v. Wich, 171 Pa. Super. 505, 90 A.2d 288 (1952), (counsel's failure to appear or file an answer). The fact that two such errors occurred in the instant case, while most unfortunate for all concerned, should not alter the result.
Since, as noted above, there was no evidence that the letters which would have informed appellee of the suit were ever mailed, the trial court was justified in accepting that part of the explanation of the default. Gardner's error as to appellee's rights, while presenting a closer question, was also properly held by the court below, exercising its discretion, to constitute a reasonable explanation of the default.
This Court has held that where a "judgment was not due to an oversight, an unintentional omission to act, or a mistake of the rights and duties of the defendant, but was the result of a decision, after deliberation, not to defend", a default judgment will not be opened. Kanai v. Sowa, 109 Pa. Super. 426, 428, 167 A. 429, 430 (1933). In the instant case, however, Gardner's error was an oversight, mistaking the rights of the appellee and thus causing appellee not to defend. He did not know he was taking any calculated or strategic risk, because, as noted by the court below, "he inferred that valid service had not yet been made." This case therefore is similar to Balk, supra, where our Supreme Court affirmed the opening of a default judgment based on the inaction of an insurance company, which after receiving a complaint against an insured misplaced it and neglected to defend. As the Court noted in Balk, Myers v. Mooney Aircraft, Inc., 429 Pa. 177, 240 A.2d 505 (1967) and Baraonfski v. Malone, 371 Pa. 479, 91 A.2d 908 (1952), two cases cited as refusing to open judgments are inapposite. "Both are marked by a deliberateness of delaying tactics on the part of the defendant which is not present here." Balk, supra, 446 Pa. at 141.
Finally, appellee's ten-month delay in filing the petition to open judgment must be considered in light of the requirement of promptness. In the circumstances of this case, however, the timeliness of appellee's petition must be considered together with the explanation of the default. The court below concluded that after receiving Gardner's letter, appellee "remained in a false sense of security until November 5, 1970, when it was served in Delaware with papers in a suit on the judgment. It [then] retained other counsel who filed a petition to open the judgment on December 30, 1970. . . . Under the circumstances of this case we cannot say that one month and twenty-five days is not prompt." The lower court's finding is not an abuse of discretion, particularly since it must be remembered that from the time of Gardner's letter until it was served in the Delaware suit, appellee had not retained other counsel on this matter.
The order of the court below is affirmed.